TaxTMI Updates e-Newsletter
Sep 21,2023

Refund of unutilised input tax credit due to inverted duty structure - calculation under Rule 89(5) of the CGST Rules - effect of Notification No.20/2018 and Circular No.56/2018 on lapse of ITC - Circular No.94/2019 as a one time measure permitting claim under 'any other' category - binding effect of reversal of ITC recorded in FORM GSTR 3B - GST Portal validation and its impact on filing of refund claims

Effect of Notification No.20/2018 and Circular No.56/2018 on lapse of ITC - calculation under Rule 89(5) of the CGST Rules - Entitlement to refund of accumulated ITC under the inverted duty structure and the correct application of Rule 89(5) read with Notification No.20/2018 and Circular No.56/2018. - HELD THAT: - The Court found that Notification No.20/2018, read with Circular No.56/2018, removed the bar of Notification No.5/2017 in respect of specified goods from 1 August 2018 and clarified that ITC accumulated on supplies received on or after 1 August 2018 would not be excluded, while ITC on purchases up to 31 July 2018 would lapse. Applying Rule 89(5), the petitioners were entitled to a refund of accumulated ITC calculated as per that rule and the notifications/circular. The respondents did not dispute the petitioners' entitlement to the total amount as calculated under Rule 89(5); the portal restrictions resulted in an automatic reduction of the claim but did not negate the underlying legal entitlement to the balance amount. [Paras 23, 24, 25, 33]

The petitioners were held entitled to the refund as calculated under Rule 89(5) read with Notification No.20/2018 and Circular No.56/2018; the restriction imposed by the portal did not extinguish that entitlement.

Circular No.94/2019 as a one time measure permitting claim under 'any other' category - binding effect of reversal of ITC recorded in FORM GSTR 3B - GST Portal validation and its impact on filing of refund claims - Validity of rejecting the second refund application filed under the 'any other' category pursuant to Circular No.94/2019 and whether reversal of ITC in GSTR 3B prevents claiming the remaining refund. - HELD THAT: - The Court construed Circular No.94/2019 as a one time administrative remedy permitting assessees, who were unable to claim the full refund due to validation checks on the common portal, to file an application under the 'any other' category for the same tax period in which the reversal occurred, accompanied by all required documents, so that the proper officer could calculate admissible refund under Rule 89(5). The respondents' reliance on the fact that the assessee had reversed ITC in GSTR 3B and that a part refund was already sanctioned did not justify rejecting the second application: the circular was intended to address precisely such portal driven inability to claim the full amount. The authorities' refusal was therefore labelled pedantic and contrary to the purpose of Circular No.94/2019. [Paras 26, 27, 28, 32, 33]

The rejection of the second refund application filed under the 'any other' category was held to be erroneous; the petitioners were entitled to the balance refund notwithstanding the reversal recorded in GSTR 3B, subject to the proper officer's calculation and procedural steps under the circular.

Final Conclusion: The writ petition is allowed; the impugned orders rejecting the second refund application are quashed and set aside. The respondents are directed to sanction the balance refund claimed for August 2018 within six weeks from receipt of this order, with applicable interest, in accordance with law.

Cancellation of GST registration - Requirement of independent decision by competent authority - Direction by higher investigative agency not binding on adjudicating authority - Opportunity of hearing and disclosure of adverse material - Remand for fresh consideration and adjudication

Cancellation of GST registration - Direction by higher investigative agency not binding on adjudicating authority - Validity of Ext.P6 order cancelling the petitioner's GST registration where the competent authority acted pursuant to a direction from DGGI, Kochi Zonal Unit - HELD THAT: - The Court found that although the DGGI, Kochi Zonal Unit had directed cancellation following intelligence about a fake invoicing cartel, the competent authority was required to form an independent opinion and not merely execute the higher authority's direction. The impugned order was set aside because the adjudicating authority did not exercise its independent adjudicatory function and appears to have followed the DGGI direction without an independent decision-making process. The Court emphasised that directions from an investigating agency do not oust the statutory duty of the adjudicating authority to arrive at its own conclusion before cancelling registration. [Paras 5, 7]

Ext.P6 cancellation order set aside on ground that the competent authority failed to take an independent decision and unduly followed the DGGI direction.

Opportunity of hearing and disclosure of adverse material - Remand for fresh consideration and adjudication - Procedure to be followed on remand and subsequent adjudication after setting aside the cancellation order - HELD THAT: - The Court directed a limited remand for fresh adjudication. The petitioner was ordered to appear on the specified date with relevant records; the authority must disclose the adverse materials collected against the petitioner and afford him opportunity to meet those materials and produce evidence. After taking evidence and hearing, the Superintendent was directed to pass a fresh order in accordance with law within the stipulated period. The Court made clear that if the show cause is cancelled, restoration of registration would follow, and if registration is again cancelled the petitioner may avail statutory remedies. The Superintendent must act independently and not be influenced by the DGGI direction. [Paras 5, 6, 7]

Matter remanded for fresh adjudication with directions to furnish adverse materials, afford personal hearing and evidence, and to pass a reasoned independent order within the time fixed.

Final Conclusion: The cancellation order (Ext.P6) is set aside and the matter is remanded for fresh, independent adjudication by the Superintendent after disclosure of adverse materials and opportunity of hearing; if the show cause is cancelled registration shall be restored, otherwise statutory remedies remain available to the petitioner.

Withdrawal of writ petition with liberty to appeal - condonation of delay - limitation for filing appeal under Section 107 of GST Act - alternative efficacious statutory remedy - jurisdiction of Assessing Officer - appellate review of assessment order - consideration of procedural irregularities - interim protection in appellate proceedings

Withdrawal of writ petition with liberty to appeal - alternative efficacious statutory remedy - Petitioner permitted to withdraw the writ petition with liberty to file an appeal before the Appellate Authority under the statutory appeals mechanism. - HELD THAT: - The Court allowed the petitioner to withdraw the writ petition and granted liberty to approach the statutory appellate forum. The Court noted that the show-cause notice and the assessment order were issued and passed by competent authorities and that an alternative efficacious statutory remedy in the form of an appeal under the GST Act existed. In view of justice, equity and bona fides of the petitioner the Court exercised its discretion to permit withdrawal and to enable the petitioner to pursue the statutory remedy. [Paras 5, 8]

Writ petition may be withdrawn and petitioner granted liberty to file appeal under Section 107 of the GST Act within the time directed by the Court.

Condonation of delay - limitation for filing appeal under Section 107 of GST Act - Delay in filing the statutory appeal caused by the pendency of the writ petition shall not be a ground for rejection; the Appellate Authority shall not insist on limitation if the appeal is filed within the period directed by this Court. - HELD THAT: - Although the limitation for filing appeal is ordinarily short and the State urged that pendency of the writ petition does not excuse delay, the Court, applying principles of equity and bona fides, held that the delay occasioned by pursuing the writ petition should not bar the petitioner from agitating the assessment before the appellate forum. The Court directed that if the appeal is filed within 30 days, the Appellate Authority shall not raise the question of limitation and shall proceed to address the merits and alleged irregularities. [Paras 6, 7, 8]

If appeal is filed within 30 days, the Appellate Authority shall not insist on limitation and shall entertain the appeal on merits.

Appellate review of assessment order - consideration of procedural irregularities - interim protection in appellate proceedings - The Appellate Authority is to consider the issues raised by the petitioner on facts and in law, including alleged procedural irregularities in framing the impugned assessment; the petitioner may also apply for interim protection which the Appellate Authority shall consider promptly. - HELD THAT: - The Court observed that pleas on facts and law, including alleged procedural defects, ought to be addressed by the appellate forum. Accordingly, it directed that the Appellate Authority shall examine the issues raised in the appeal without being precluded by the limitation question (subject to the time-frame ordered) and that any application for interim protection filed by the petitioner should be considered with promptitude, provided such interim relief is not barred by law. [Paras 3, 8]

Appellate Authority to adjudicate the merits and alleged procedural irregularities and to consider any application for interim protection with promptitude.

Final Conclusion: Writ petition disposed of on petitioner's request for withdrawal; petitioner granted liberty to file appeal under Section 107 of the GST Act within 30 days, the Appellate Authority directed not to insist on limitation and to decide the appeal on merits including alleged procedural irregularities, and to consider any interim protection application promptly.

Constitutional validity of Section 16(4) of the CGST/BGST Act - entitlement to input tax credit as a condition precedent - Article 300A - right to property - Article 19(1)(g) - freedom of trade and profession - doctrine of reading down - statutory concession subject to prescribed conditions

Constitutional validity of Section 16(4) of the CGST/BGST Act - entitlement to input tax credit as a condition precedent - Article 300A - right to property - Article 19(1)(g) - freedom of trade and profession - doctrine of reading down - statutory concession subject to prescribed conditions - Section 16(4) of the CGST/BGST Act is constitutionally valid and not violative of Articles 19(1)(g) or 300A (and related challenges under Article 14/13 are rejected). - HELD THAT: - The Court held that the language of Section 16(4) is plain and unambiguous and forms one of the conditions which a registered person must satisfy to become entitled to take input tax credit under Section 16(1). The entitlement to ITC under Section 16(1) is subject to conditions and restrictions prescribed by the enactment, and subsection (4) is a mandatory condition precedent rather than a mere procedural formality. The jurisprudential principle that concessions granted by statute are to be availed strictly in accordance with statutory scheme was applied. The Court found no necessity or reason to read down subsection (4); the doctrine of reading down is available only where a provision is ambiguous or another interpretation would save constitutionality. Reliance on precedents upholding similar statutory cut-off conditions for claiming input tax credit supported the conclusion that fiscal legislation uniformly applied cannot be struck down as violative of Article 19(1)(g). On Article 300A, the Court concluded that the right to ITC does not vest independent of compliance with statutory conditions; deprivation under subsection (4) therefore occurs in accordance with law and is not an unconstitutional taking of property. Consequently, challenges based on arbitrariness, confiscation, double taxation or absence of rationale for a cut-off date were rejected as unsustainable. [Paras 28, 29, 31, 37, 38]

Sub-section (4) of Section 16 of the CGST/BGST Act is constitutionally valid; the writ petitions are dismissed.

Final Conclusion: The batch of writ petitions challenging Section 16(4) of the CGST/BGST Act was dismissed; the Court upheld subsection (4) as a mandatory condition for availing input tax credit and found it not violative of Articles 19(1)(g), 14 or 300A. There shall be no order as to costs.

Misuse of GST registration - Investigation into wrongful GST registration - Liability for availing input tax credit without actual receipt - Penalty under Section 122 of CGST/TNGST Act, 2017 - Vacation of penalty upon proof of non-involvement

Misuse of GST registration - Investigation into wrongful GST registration - Penalty under Section 122 of CGST/TNGST Act, 2017 - Vacation of penalty upon proof of non-involvement - Whether the question of wrongful GST registration and the consequent imposition of penalties should be investigated and determined, with the penalties to remain effective only if investigation finds the petitioner responsible. - HELD THAT: - The Court recorded the petitioner's case that his PAN and other particulars were mis-used to obtain GST registration and that he had ceased business in 2013. The impugned order had imposed penalties under the CGST/TNGST Act, 2017 for alleged availment and passing of input tax credit without actual supply. Rather than deciding the factual question on the writ petition, the Court directed a joint investigation by the Police (including Cyber Crime) and the tax authorities to ascertain whether the GST registration was obtained by the petitioner, his nominee, or a third party and to probe the alleged wrongful registration and illegal credits. Pending that inquiry, the court left the fate of the penalties contingent on the investigation's outcome: the penalties will stand affirmed if the investigation finds the petitioner liable, and will be vacated automatically if the investigation establishes that the petitioner was not involved. The Court gave a 12 month timeline for completion of the investigation and observed that the petitioner has alternate statutory remedies such as appeal, but proceeded to dispose the writ by directing the investigatory course outlined above. [Paras 8, 9]

Writ petition disposed by directing respondents (tax and law enforcement, including Cyber Crime) to investigate the origin and propriety of the GST registration and the alleged illegal credits within 12 months; penalties affirmed if investigation finds petitioner responsible and automatically vacated if petitioner is found not involved.

Final Conclusion: The writ petition is disposed by directing a joint investigation into the alleged wrongful GST registration and illegal input tax credits; the penalties imposed in the impugned order will remain in force if the investigation finds the petitioner culpable and will be vacated if it establishes non involvement; investigation to be completed within 12 months.

Legality of cash seizure under power to seize unaccounted cash - release of seized currency - voluntary deposit of tax, interest and penalty and right to refund/adjustment - exclusion of period of pendency from limitation

Legality of cash seizure under power to seize unaccounted cash - release of seized currency - Seized currency held in custody of the respondent is to be released to the petitioner. - HELD THAT: - The Court applied the principle laid down in the recent decision of this Court in Deepak Khandelwal Proprietor M/s Shri Shyam Metal v. Commissioner of CGST, Delhi West & Anr., concluding that the power under Section 67(2) of the CGST Act to seize cash on the ground that it is unaccounted cash does not sustain in the facts of this case. Having found that the seizure is covered by that precedent in favour of the petitioner, the Court directed release of the seized currency and ordered the respondent to remit proceeds of the fixed deposit (with interest) to the petitioner's bank account within one week, thereby finally disposing of the challenge to the seizure. [Paras 13, 14, 18]

Seized cash to be released and proceeds remitted to the petitioner's bank account within one week.

Voluntary deposit of tax, interest and penalty and right to refund/adjustment - The respondents are not precluded from taking steps in relation to the amount voluntarily deposited by the petitioner, and the petitioner may apply for refund or seek adjustment as per law. - HELD THAT: - The Court recorded that the petitioner had deposited a sum on assurance of release of the seized cash, but the deposit was voluntary. The respondents have not accepted that the amount is refundable. The Court clarified that it does not preclude the respondents from taking any steps regarding the amount deposited while the petition was pending, nor does it preclude the petitioner from filing an appropriate application for refund or seeking adjustment if otherwise due. No determination on the substantive claim for refund or adjustment was made; the parties retain their respective remedies under law. [Paras 15]

Respondents may take lawful steps regarding the deposited amount; petitioner may file for refund or adjustment if entitled.

Exclusion of period of pendency from limitation - The period during which the petition was pending is to be excluded from the period of limitation for any proceedings instituted by either party. - HELD THAT: - The Court directed that the time consumed in the pendency of the present petition, from institution to date, shall be excluded from limitation for any future proceedings that may be initiated by either party, thereby preserving limitation rights affected by the litigation. [Paras 16]

Period of pendency of this petition excluded from limitation for future proceedings.

Final Conclusion: The petition is allowed: the seized currency is ordered released and the fixed deposit proceeds (with interest) remitted to the petitioner's bank account within one week; the respondents remain free to take lawful action regarding the voluntarily deposited tax, interest and penalty and the petitioner may seek refund or adjustment if entitled; the period of pendency of this petition is excluded from limitation for any future proceedings.

Deemed withdrawal of assessment orders under Section 62 - Compliance with G.O.Ms.No.38, Commercial Taxes and Registration (B1), dated 05.04.2023 - Payment of interest under Section 50(1) and late fee under Section 47 as condition for relief - Revocation of cancellation of registration and its effect on assessment - Setting aside assessment orders subject to conditional compliance

Deemed withdrawal of assessment orders under Section 62 - Compliance with G.O.Ms.No.38, Commercial Taxes and Registration (B1), dated 05.04.2023 - Payment of interest under Section 50(1) and late fee under Section 47 as condition for relief - Setting aside assessment orders subject to conditional compliance - Impugned assessment orders passed under Section 62 for April 2018 to March 2019 are to be set aside and deemed withdrawn provided the petitioner complies with the conditions of G.O.Ms.No.38/2023. - HELD THAT: - The Court held that the State Government notification G.O.Ms.No.38 dated 05.04.2023 grants relief to registered persons who failed to furnish a valid return within thirty days from service of assessment orders issued on or before 28.02.2023 by permitting withdrawal of such assessment orders if specified conditions are met. Applying that notification and following the earlier decision in M/s. Sri Senthil Andavar Agencies (noted in the order), the impugned assessment orders under Section 62 are set aside on the condition that the petitioner furnishes the return as required by the notification and pays the interest due under Section 50(1) and the late fee payable under Section 47. The respondents are directed to inform the petitioner of the amount payable, and the petitioner is to comply within the stipulated time; the respondents must complete the exercise of intimating the amount within eight weeks from receipt of this order. [Paras 4]

Impugned assessment orders deemed withdrawn and set aside on payment of the prescribed interest and late fee and compliance with the notification; respondents to intimate payable amount within eight weeks.

Final Conclusion: Writ petitions disposed of by setting aside the assessment orders passed under Section 62 for April 2018 to March 2019 as deemed withdrawn, conditioned upon the petitioner filing the return and paying the interest and late fee as mandated by G.O.Ms.No.38/2023; respondents to intimate the payable amount within eight weeks. No costs.

Reopening of assessment under Section 147 - mandatory notice under Section 143(2) - notice deemed valid where assessee has participated (Section 292BB) - Section 292BB does not cure complete absence of notice - assessment invalid for non issuance of jurisdictional notice

Mandatory notice under Section 143(2) - Section 292BB does not cure complete absence of notice - assessment invalid for non issuance of jurisdictional notice - Validity of the reassessment framed under Section 147 read with Section 143(3) where no notice under Section 143(2) was issued - HELD THAT: - The Tribunal examined whether the reassessment completed under Section 147 read with Section 143(3) could stand where the Assessing Officer had not issued a notice under Section 143(2). The Tribunal considered the principle in Laxman Das Khandelwal and related precedents, and the scope of Section 292BB which makes defective service of notice immaterial only where a notice emanated from the department and the assessee participated. The AO, in a written report to the Tribunal, expressly admitted that the assessee had not filed a return in response to the Section 148 notice and that no notice under Section 143(2) was issued or served; the assessment record was not produced despite directions. On these facts the Tribunal held that Section 292BB could not validate a complete absence of a Section 143(2) notice, and that omission to issue the jurisdictional notice is not a curable procedural irregularity. Following the cited authority and the AO's own admission, the Tribunal concluded that the reassessment was invalid and could not sustain additions founded on that assessment; accordingly the additions were deleted and other contested grounds were rendered academic. [Paras 11, 12, 15, 16]

The reassessment under Section 147 read with Section 143(3) is invalid for non issuance of the mandatory notice under Section 143(2); additions founded on that assessment are deleted.

Final Conclusion: The Revenue's appeal is dismissed and the assessee's Cross Objection is partly allowed: the assessment framed under Section 147 read with Section 143(3) for Assessment Year 2010-11 is held invalid for want of a notice under Section 143(2), the additions are deleted, and the remaining grounds are left academic.

Tax deduction at source under section 194C - Definition of "work" in Explanation clause (iv)(e) to section 194C - Distinction between contract for sale of goods and works contract - Liability as assessee in default under section 201(1) and interest under section 201(1A) - Relevance of invoices/VAT as evidence of sale of goods - Mutatis mutandis application of a lead-order to allied appeals

Tax deduction at source under section 194C - Definition of "work" in Explanation clause (iv)(e) to section 194C - Distinction between contract for sale of goods and works contract - Relevance of invoices/VAT as evidence of sale of goods - Whether payments made for purchase of packing material attracted deduction of tax at source under section 194C or were purchases of goods not liable to TDS under that provision. - HELD THAT: - The Tribunal examined the nature of the transactions and materials placed on record, including invoices showing levy of value added tax. It observed that section 194C applies to payments to a contractor for carrying out any "work" as defined in the Explanation and that sub-clause (e) of clause (iv) includes manufacturing or supplying a product using material purchased from the customer but expressly excludes manufacturing using material purchased from a person other than the customer. On the material before it the assessee established that payments were for purchase of packing material (with VAT charged) and that suppliers purchased and manufactured the material on their own account subject only to specification of colour/design. The Tribunal held that such transactions were purchases of goods and not contracts for carrying out work liable to TDS under section 194C. Consequently, the burden to show applicability of section 194C was not discharged by the revenue and the levy under section 201(1) (and consequential interest under section 201(1A)) was wrongly made by the lower authorities. [Paras 10, 11]

Levy of TDS under section 194C was quashed as the payments related to purchase of packing material (sale of goods) and not to a works contract; appeals allowed.

Final Conclusion: The Tribunal allowed the appeals for assessment years 2015-16 to 2019-20, holding that payments for packing material were purchases of goods (supported by invoices and VAT) and did not attract TDS under section 194C; the demands under section 201(1)/201(1A) as confirmed by the lower authorities were set aside and the lead decision applied mutatis mutandis to the other appeals.

Deductibility of employer's contribution to Provident Fund and Employees' State Insurance under section 36(1)(va) - effect of delayed deposit of employees' contributions on allowability of deduction - corrective effect of a revised/correct tax audit report on assessment adjustments - application of Supreme Court precedent in Checkmate Services Pvt. Ltd. to delayed statutory deposits - no estoppel against statute where statutory conditions for deduction are satisfied

Deductibility of employer's contribution to Employees' State Insurance under section 36(1)(va) - corrective effect of a revised/correct tax audit report on assessment adjustments - no estoppel against statute where statutory conditions for deduction are satisfied - Deduction allowable in respect of employees' ESIC contributions shown to have been deposited before the statutory due date as per the corrected tax audit report. - HELD THAT: - The Tribunal examined the tax audit report placed on record which shows monthly ESIC deposits dated 17th of each month in 2017-18, prior to the due date of the 21st as recorded in the audit schedule. The challan verification form on record corroborates these dates. In the light of the documentary evidence and applying the principle that there is no estoppel against the statute, the Tribunal held that where the requisite statutory condition for deduction (timely deposit) is satisfied, the deduction under section 36(1)(va) must be allowed. The Tribunal therefore set aside that part of the CIT(A)'s order disallowing ESIC contributions amounting to Rs. 19,09,265 and directed the AO to allow the deduction after verification as claimed in the corrected audit report (paras. 8, 9, 10, 11). [Paras 8, 9, 10, 11]

The ESIC contribution of Rs. 19,09,265 deposited before the due date is allowable as deduction under section 36(1)(va); the AO is directed to allow it after verification.

Deductibility of employer's contribution to Provident Fund under section 36(1)(va) - effect of delayed deposit of employees' contributions on allowability of deduction - application of Supreme Court precedent in Checkmate Services Pvt. Ltd. to delayed statutory deposits - Disallowance of employer's contribution to Provident Fund which was deposited after the statutory due date was sustained. - HELD THAT: - The Tribunal noted the binding rule of law as laid down by the Supreme Court in Checkmate Services Pvt. Ltd. that an employer's deduction under section 36(1)(va) is not permissible where employees' contributions have been deposited after the statutory due date. The AO/CIT(A) disallowed the portion of contributions shown to be deposited late, and the Tribunal found this disallowance to be in accordance with the settled legal position. Consequently, the Tribunal sustained the disallowance of the remaining amount representing late PF deposit (paras. 5, 10, 11). [Paras 5, 10, 11]

The disallowance of Rs. 1,96,438 in respect of PF contributions deposited after the due date is upheld in view of the Supreme Court's decision in Checkmate Services Pvt. Ltd.

Final Conclusion: The appeal is partly allowed: the Tribunal directs allowance of ESIC contributions of Rs. 19,09,265 shown to have been deposited before the due date upon verification, and upholds the disallowance of Rs. 1,96,438 in respect of PF contributions deposited after the due date; the matter is remitted to the AO for compliance with these directions.

Mandatory time limit for Transfer Pricing Officer under section 92CA(3A) - computation of limitation period for transfer pricing reference vis-a -vis section 153 - effect of TPO order passed beyond prescribed period on eligibility under section 144C(15)(b) - quashing of transfer pricing order and consequential final assessment as barred by limitation

Mandatory time limit for Transfer Pricing Officer under section 92CA(3A) - computation of limitation period for transfer pricing reference vis-a -vis section 153 - Validity of the Transfer Pricing Officer's order dated 01/11/2019 as being within the time prescribed for passing an order under the transfer pricing provisions. - HELD THAT: - The Tribunal accepted the interpretation adopted by the Hon'ble Madras High Court in Pfizer Healthcare India Private Ltd and the Division Bench in DCIT vs. Saint Gobain India Pvt. Ltd. that the 60-day period prescribed by the proviso to the transfer pricing provision is to be computed excluding the last date for completion of assessment under section 153. Applying that computation to AY 2016-17 (limitation under section 153 expiring on 31.12.2019 after extension), the 60-day cutoff fell such that the TPO's order ought to have been passed on or before 31.10.2019. The TPO's order was passed on 01.11.2019, i.e., after the expiry of the prescribed period; consequently the TPO order is held to be barred by limitation and is set aside. [Paras 11, 12]

The Transfer Pricing Officer's order dated 01/11/2019 is barred by limitation and is set aside.

Effect of TPO order passed beyond prescribed period on eligibility under section 144C(15)(b) - quashing of transfer pricing order and consequential final assessment as barred by limitation - Whether the Final Assessment Order dated 31/03/2021 is barred by limitation and liable to be quashed in view of the invalidity of the TPO order. - HELD THAT: - The Tribunal held that because the TPO's order was time barred and therefore invalid, the appellant did not qualify as an "eligible assessee" under section 144C(15)(b)(i). Citing co ordinate decisions including Mondelez India Foods Pvt. Ltd. and Atos India Pvt. Ltd. , the Tribunal reasoned that absence of a valid TPO determination means there was no lawful basis to invoke the special DRP procedure under section 144C(1) and that consequential draft and final assessment orders could not be validly made under that scheme. Applying those principles to the facts, the Tribunal concluded that the Assessing Officer lacked jurisdiction to pass the final assessment order dated 31/03/2021 and that the assessment was therefore barred by limitation and bad in law. [Paras 16, 17]

The Final Assessment Order dated 31/03/2021 is barred by limitation and is quashed as bad in law.

Final Conclusion: The additional ground is allowed. The Transfer Pricing Officer's order dated 01/11/2019 and the Final Assessment Order dated 31/03/2021 are quashed as being barred by limitation; the appeal is allowed and other grounds are rendered infructuous.

Allowability of employees' contribution to Provident Fund and Labour Welfare Fund under section 36(1)(va) read with section 43B - treatment of date of payment - cheque tendered/transaction reflected back and applicability of CBDT Circular No.261 (date of tender) - remand for verification of additional evidence - treatment of interest on income-tax refund under ICDS IV - accrual versus receipt - credit for Buy-Back Tax under section 115QA and rectification/application processing - credit for self-assessment tax and rectification of assessment records

Allowability of employees' contribution to Provident Fund and Labour Welfare Fund under section 36(1)(va) read with section 43B - treatment of date of payment - cheque tendered/transaction reflected back and applicability of CBDT Circular No.261 (date of tender) - remand for verification of additional evidence - Addition for delayed deposit of employees' contribution to Provident Fund and Labour Welfare Fund partly upheld and partly remanded. - HELD THAT: - The Assessing Officer disallowed Rs. 1,70,84,695 as delayed deposits invoking section 36(1)(va) read with section 2(24)(x). On appeal the Tribunal, relying on the Supreme Court decision cited by the parties, upheld disallowance only to the extent of Rs. 1,71,351 which was found to have been actually delayed (accepted position following Checkmate Services P. Ltd.). As to the balance (Rs. 1,69,13,344), the assessee produced additional evidences before the Tribunal (challans, bank statements and correspondence with EPFO) showing that cheques were issued and amounts were debited before the prescribed due dates but were reversed due to technical glitches on the EPFO portal. The Tribunal observed that the principle in CBDT Circular No.261 (date of tender of cheque to be treated as date of payment) is applicable in the circumstances and that the lower authorities had not considered or verified the additional documents, having proceeded solely on Tax Audit Report dates. In view of these facts and the lack of findings by the AO on the newly produced material, the Tribunal restored the remainder of the issue to the file of the AO for fresh examination and verification of the assessee's submissions and documents, with directions that if initial deposits before due dates and reversal due to EPFO glitches are established, the AO shall delete the additions. [Paras 7, 8]

Disallowance upheld to the extent of Rs. 1,71,351; balance remitted to the AO for fresh examination of additional evidences and deletion if initial timely deposits are established.

Credit for Buy-Back Tax under section 115QA and rectification/application processing - remand for processing of application and verification of challan - Claim for credit of Buy-Back Tax not allowed by AO was directed to be processed by the AO. - HELD THAT: - The assessee produced challan evidence of deposit of Buy-Back Tax and had filed an application under section 115QA for rectification. The Tribunal found that the matter had not been resolved by the AO and that the assessee's factual contentions as to deposit were not controverted by Revenue. In view of the pending rectification/application and the material on record, the Tribunal directed the AO to process the application at the earliest and permitted the assessee to furnish requisite details to facilitate verification and decision in accordance with law. [Paras 12]

Matter restored to the AO to process the rectification/application and decide the claim for Buy-Back Tax credit in accordance with law.

Treatment of interest on income-tax refund under ICDS IV - accrual versus receipt - prevention of double taxation where same income offered in different years - Addition of interest on income-tax refund in A.Y. 2018-19 deleted as same interest was taxed in later year upon actual receipt. - HELD THAT: - The assessee had included interest on income-tax refund on an accrual basis in the year under consideration but actually received and offered the same interest to tax in A.Y. 2021-22 on receipt basis pursuant to ICDS recognition principles. Revenue did not place material to contradict this factual position. The Tribunal held that the amount cannot be taxed twice; accordingly it directed the AO to delete the addition for interest on refund to avoid double taxation, noting the rectification application before the AO which remained pending. [Paras 16]

Addition on account of interest on income-tax refund in A.Y. 2018-19 deleted.

Credit for self-assessment tax and rectification of assessment records - remand for processing of rectification application - Claim for credit of self-assessment tax was directed to be processed by the AO. - HELD THAT: - The assessee contended that self-assessment tax had been deposited and a rectification application filed; the AO had not granted the tax credit. Revenue did not controvert the factual position. The Tribunal directed the AO to expeditiously process the rectification application and pass appropriate orders in accordance with law, permitting the assessee to furnish any details required to process the claim. [Paras 19]

AO directed to process and decide the rectification application and grant credit of self-assessment tax as appropriate.

Final Conclusion: The appeal is partly allowed: the disallowance for delayed employees' contributions is sustained only to a small extent and remanded in part for verification; the addition for interest on income-tax refund is deleted; claims for Buy-Back Tax credit and self-assessment tax credit are remitted to the Assessing Officer for expeditious processing of pending rectification/applications and verification of the produced challans and records.

Prohibition of Benami Property Transactions - provisional attachment order - HELD THAT:- It is not in dispute that the issues raised in these special leave petitions are covered by the judgment of this Court in Union of India & Anr. Vs. M/s. Ganpati Dealcom Pvt. Ltd.. [2022 (8) TMI 1047 - SUPREME COURT]

In the circumstances, the special leave petitions stand dismissed.

Registration under Section 10(23C)(vi) of the Income tax Act - predominant engagement in educational activities - charitable purpose - nominal profit not converting charity into commercial activity - assessment of trust deed and financial statements for grant of exemption

Registration under Section 10(23C)(vi) of the Income tax Act - predominant engagement in educational activities - nominal profit not converting charity into commercial activity - assessment of trust deed and financial statements for grant of exemption - Whether the Tribunal was justified in directing the CIT(Exemption) to grant registration/certificate to the assessee trust under Section 10(23C)(vi) on the materials before it. - HELD THAT: - The Tribunal examined the trust deed, which expressly declared the trust's object as spreading and imparting education through institutions from pre primary to post graduation and treated ancillary social, cultural and sports activities as incidental to the educational purpose. The Tribunal also considered the assessee's audited returns, profit and loss account and balance sheet showing fees and reimbursement of transportation and book expenses and expenditure on teachers, transport and educational activities. On these materials the Tribunal concluded that the trust was predominantly engaged in educational activities and that the small surplus earned did not indicate a commercial motive but was utilised for charitable objects. The High Court, on review of the Tribunal's findings, found no error in the appreciation of the trust deed and financial records and observed that the CIT(Exemption)'s rejection was misconceived in light of the Tribunal's factual conclusions. The Court therefore declined to interfere with the Tribunal's direction to grant registration under Section 10(23C)(vi). [Paras 7, 8]

Tribunal's direction to grant registration under Section 10(23C)(vi) upheld; appeal dismissed.

Final Conclusion: The High Court found no substantial question of law warranting interference with the Tribunal's factual conclusion that the assessee trust is predominantly engaged in educational activities; the Tribunal's direction to the CIT(Exemption) to grant registration under Section 10(23C)(vi) is affirmed and the appeal is dismissed.

Arm's Length Price - rejection of valuation by TPO - transfer pricing adjustment in respect of intangibles - commercial expediency - prudent businessman test - reference to Transfer Pricing Officer under Section 92CA(1) of the Act - role of income tax authorities versus commercial judgment

Arm's Length Price - rejection of valuation by TPO - transfer pricing adjustment in respect of intangibles - Validity of the TPO's determination that the consideration paid for acquisition of intangibles was not at Arm's Length Price and the consequent adjustment made in assessment. - HELD THAT: - The Court considered the TPO's conclusion that the assessee had paid a premium for intangibles and that the stated consideration exceeded ALP. The High Court reviewed the ITAT's decision which had earlier partly allowed the assessee's appeal against the TPO's adjustments. The Court found no error in the ITAT's conclusion that the TPO had not justifiably rejected the assessee's valuation reports and that the assessment adjustments could not be sustained as raising a substantial question of law. The factual exercise of valuation by the TPO and the consequent computation of ALP were treated as matters where the tribunal's appreciation was not shown to be legally unsustainable. [Paras 2, 3, 4]

The TPO's rejection of the assessee's valuation and the transfer pricing adjustment in relation to intangibles is not shown to raise any substantial question of law; the ITAT's conclusion is upheld.

Commercial expediency - prudent businessman test - role of income tax authorities versus commercial judgment - Whether income tax authorities (including the TPO/AO) can substitute their own commercial judgment for that of the assessee in valuing business considerations and allocating weightages. - HELD THAT: - Relying on the doctrine of commercial expediency and the 'prudent businessman' principle as applied in precedent, the Court held that revenue authorities cannot place themselves in the position of the taxpayer's management to determine what a prudent businessman would have done in respect of commercial decisions such as allocation of weightages or amount to be invested. The Court endorsed the ITAT's approach that the TPO/AO must not act as businessmen and substitute their own commercial assessments where the assessee's valuation and commercial rationale are plausible; such substitution does not give rise to a substantial question of law warranting interference. [Paras 4]

Income tax authorities cannot, as a matter of law, supplant the commercial judgment of the assessee by re weighing business expedience; the ITAT's application of this principle is sustained.

Final Conclusion: The appeal is dismissed. No substantial question of law arises; the ITAT's conclusions upholding the assessee's valuation approach and limiting the TPO's adjustments are affirmed.

Section 80IB(10) deduction - approval of housing project - deemed approval on first building plan approval - precedent reliance in assessee's own earlier assessment years - no substantial question of law

Section 80IB(10) deduction - approval of housing project - deemed approval on first building plan approval - precedent reliance in assessee's own earlier assessment years - Claim for deduction under Section 80IB(10) of the Income Tax Act in respect of the 'Maninagar' housing project for AY 2009-10 was allowable despite separate approvals/completion certificates for individual units. - HELD THAT: - The Tribunal and the first appellate authority allowed the deduction by applying the statutory principle that where approval in respect of a housing project is obtained more than once, the housing project is to be deemed approved on the date the building plan is first approved by the local authority. The authorities below followed the jurisdictional High Court decision in Commissioner of Income Tax v. B.M. and Brothers and consistent findings in the assessee's own earlier assessment years (which were not successfully appealed by the Department). Having regard to those precedents and identical facts across assessment years, the Tribunal found no error in treating the project as approved for purposes of Section 80IB(10) and deleted the additions made by the Assessing Officer. [Paras 6, 7]

Deduction under Section 80IB(10) allowed for the units of the housing project approved prior to the relevant cut off, and additions deleted.

Final Conclusion: The High Court declined to entertain the appeal, holding that no substantial question of law arises where the Tribunal and appellate authority correctly applied the principle of deemed approval and followed binding precedent and earlier identical decisions in the assessee's own case; appeal dismissed.

Tax arrear - prosecution in respect of tax arrear - ineligibility under Section 9(a)(ii) of the DTVSV Act - interpretation of exclusionary provision of the DTVSV Act - validity of departmental clarification (Circular answer to Question No.73) - application of Vivad se Vishwas scheme to pending assessments

Interpretation of exclusionary provision of the DTVSV Act - tax arrear - prosecution in respect of tax arrear - validity of departmental clarification (Circular answer to Question No.73) - Validity of the clarification in answer to Question No.73 of Circular No.21/2020 insofar as it excludes a taxpayer from filing a declaration for an assessment year merely because prosecution has been instituted for that assessment year on issues unrelated to tax arrear. - HELD THAT: - The Court examined Section 9(a)(ii) read with the definition of "tax arrear" in Section 2(1)(o) and held that the statutory exclusion applies only where prosecution is instituted in respect of tax arrear relatable to an assessment year. The circular's answer to Question No.73, which debarred filing for an assessment year simply because any prosecution existed for that assessment year even on issues not constituting "tax arrear", departs from the plain and purposive meaning of Section 9(a)(ii). Such an interpretation would defeat the object of the DTVSV Act which is to permit settlement of disputes in respect of defined tax arrears; construing clause (ii) to cover prosecutions on unrelated issues would be illogical and contrary to legislative intent. For these reasons the circular provision as to Question No.73 was held to be inconsistent with Section 9(a)(ii) and was set aside. [Paras 32, 34]

Answer to Question No.73 in Circular No.21/2020 is quashed to the extent it excludes declarations for issues not relating to tax arrear.

Application of Vivad se Vishwas scheme to pending assessments - ineligibility under Section 9(a)(ii) of the DTVSV Act - tax arrear - Whether the petitioner's declarations for Assessment Years 2010-2011 and 2011-2012 were validly rejected on account of prosecution having been instituted. - HELD THAT: - Applying the legal principle that Section 9(a)(ii) bars only those cases where prosecution is instituted in respect of tax arrear relatable to the assessment year, the Court found Macrotech (Bombay High Court) to be squarely applicable. The prosecution against the petitioner, initiated under Section 276C(2), did not render the tax arrears for the stated assessment years ineligible for settlement under the DTVSV Act where the prosecution was not in respect of the defined "tax arrear". Consequently, the matter of petitioner's declarations cannot be decided on the basis of the impugned clarification and must be determined by respondent no.1 in conformity with the DTVSV Act. [Paras 21, 22, 23]

Rejection of the petitioner's declarations is set aside to the extent that respondent no.1 must decide the declarations in conformity with the DTVSV Act (declarations to be considered without reliance on the quashed answer to Question No.73).

Final Conclusion: The Court set aside the departmental clarification in answer to Question No.73 of Circular No.21/2020 as inconsistent with Section 9(a)(ii) of the DTVSV Act and directed that the petitioner's declarations for Assessment Years 2010-2011 and 2011-2012 be decided by the authority in accordance with the DTVSV Act, without relying on the impugned clarification; writ petition allowed to that extent.

Rejection of books of account under Section 145(3) - estimation of gross profit by the Assessing Officer - reasonableness of gross profit estimation - use of comparable group concerns and Settlement Commission determination as basis for estimation - concurrent findings and standard of interference by appellate courts

Rejection of books of account under Section 145(3) - estimation of gross profit by the Assessing Officer - reasonableness of gross profit estimation - use of comparable group concerns and Settlement Commission determination as basis for estimation - concurrent findings and standard of interference by appellate courts - Whether the Assessing Officer was justified in rejecting the books of account and estimating gross profit at 4%, or whether the CIT(A) and Tribunal were correct in estimating a reasonable gross profit at 2% and confirming the reduced additions. - HELD THAT: - The Assessing Officer rejected the assessee's books under Section 145(3) and applied a uniform gross profit rate of 4% for the group without producing comparable third party evidence to justify that rate. The CIT(A) examined the material, observed that the AO was not on a sound footing in completely rejecting the books, and noted that other group concerns and the Settlement Commission had accepted substantially lower gross profit rates (around 1%-2%), including an offer of 2% accepted by the Settlement Commission. Having regard to the nature of trading in agricultural commodities and subsequent assessment orders in related group cases, the CIT(A) considered gross profit at 2% reasonable and deleted parts of the addition; the Tribunal concurred, noting that Revenue failed to produce evidence to sustain enhancement from 2% to 4%. The High Court found these concurrent conclusions to be factual determinations supported by the record and not raising any substantial question of law requiring interference. [Paras 5]

Confirmed the reduction of the gross profit estimation to 2% as reasonable and dismissed Revenue's challenge to the AO's 4% estimation, thereby upholding the reduced addition.

Final Conclusion: The High Court dismissed the Tax Appeal, holding that the concurrent factual conclusions of the CIT(A) and Tribunal-reducing the AO's estimated gross profit to 2% based on group comparables and the Settlement Commission's acceptance-do not raise any substantial question of law; appeal dismissed with no order as to costs.

Treatment of depreciation for computation of book profit under section 115JB - allowance of depreciation charged in books where accounts are prepared and certified - revisional jurisdiction under Section 263: assessment order erroneous and prejudicial to the revenue - application of Section 40A(2)(b) to related party transactions and determination of fair market value - reasonableness of Assessing Officer's plausible view after verification - effect of pendency of reference to larger Bench on existing precedents

Treatment of depreciation for computation of book profit under section 115JB - allowance of depreciation charged in books where accounts are prepared and certified - revisional jurisdiction under Section 263: assessment order erroneous and prejudicial to the revenue - Whether the revisional order under Section 263 was justified in disallowing depreciation claimed in the profit and loss account (calculated as per Income tax Rules) for the purpose of computing book profit under section 115JB by substituting rates prescribed under the Companies Act. - HELD THAT: - The Tribunal relied on binding judicial authority holding that where an assessee consistently charges depreciation in its books at rates under the Income tax Rules and the accounts are prepared and certified in accordance with the Companies Act, the Assessing Officer lacks jurisdiction under section 115JB to rework book profits by substituting Schedule XIV rates. The High Court noted similar precedents of this jurisdiction which treat the Companies Act rates as minimum and recognise the allowance of higher depreciation reflected in properly prepared and disclosed books. The Court further observed that the pendency of a reference to a larger Bench does not displace existing binding decisions until altered by that Bench, and thus the ITAT was correct in holding that the Commissioner erred in concluding that the assessment order was erroneous and prejudicial to the revenue on this ground. [Paras 6, 8]

Revisional exercise under Section 263 was not justified; the Tribunal rightly held that no error prejudicial to revenue arose from allowing depreciation as charged in the assessee's books for computation of book profit under section 115JB.

Application of Section 40A(2)(b) to related party transactions and determination of fair market value - reasonableness of Assessing Officer's plausible view after verification - Whether the revisional order was justified in treating the Assessing Officer's acceptance of related party payments (after verification) as erroneous and prejudicial to the revenue under Section 263 for want of determination of fair market value under Section 40A(2)(b). - HELD THAT: - The Tribunal found, and the High Court agreed, that the Assessing Officer had made inquiries and carried out verification in respect of the related party transactions and had accepted the genuineness of the payments. The Court applied the principle that where the Assessing Officer, after inquiries, takes a plausible view and accepts the transactions, such a view cannot be adjudged erroneous and prejudicial to the revenue so as to justify exercise of revisional jurisdiction. Reliance was placed on authority affirming that acceptance by the AO after verification constitutes a tenable view which should not be overturned as prejudicial. [Paras 9, 10]

No infirmity in the assessment on the ground of Section 40A(2)(b); the revisional jurisdiction was not attracted as the Assessing Officer's verified, plausible view was accepted.

Final Conclusion: Both substantial questions of law raised by the revenue were answered against it; the Tax Appeal is dismissed and the Tribunal's order upholding the assessment is maintained.

Onus on assessee to prove identity, creditworthiness and genuineness of creditors for unexplained credits under Section 68 - addition to income where explanation of credits is not proper, reasonable or acceptable - Assessing Officer's enquiry and discretion to treat unexplained credits as income - concurrent findings of fact and absence of perversity as ground for interference

Onus on assessee to prove identity, creditworthiness and genuineness of creditors for unexplained credits under Section 68 - concurrent findings of fact and absence of perversity as ground for interference - Whether the Tribunal was justified in confirming the additions treating the unsecured loans as unexplained credits - HELD THAT: - The Court upheld the Tribunal's confirmation of additions because the assessee failed to discharge the burden of proof as to (i) the creditworthiness of the alleged creditors, and (ii) the genuineness of transactions. For the Rs. 5,00,000 alleged from Ms. Gunmala Devi the passbook was unauthenticated, the creditor did not personally appear, the creditor's balance sheet obtained from her Assessing Officer did not reflect the loan and the cash-flow statement produced lacked authorization and credibility; accordingly identity, creditworthiness and genuineness were not established. For the Rs. 3,00,000 from Mr. A.P.N. Singh, although his identity was established, the asserted source (sale consideration) was not reflected in his return and no balance-sheet was produced to demonstrate capacity; bank documents produced were not relatable to the loan and the source of preceding credit was unexplained. For the Rs. 1,00,000 from Mr. Syed Aijaz Alam, the creditor's modest banking profile, his employment with the assessee (small salary), and inability to satisfactorily trace the source of the preceding credit rendered the explanation unsatisfactory. Applying the settled principle that where the explanation is not proper, reasonable or acceptable the Assessing Officer may treat the credit as income, the concurrent factual findings of the authorities were not perverse and call for no interference. [Paras 10, 11, 12, 13]

Tribunal's confirmation of the additions was proper; additions sustained and appeal dismissed.

Final Conclusion: The Miscellaneous Appeal is dismissed; the Tribunal's concurrent factual findings sustaining additions in respect of the unsecured loans for AY 2005-06 are upheld and there is no reason to interfere.

Assessment under Section 153C - Recording of satisfaction as a jurisdictional fact - Year-wise nexus between seized material and assessment year - Distinction between Section 153A and Section 153C - Requirement that seized material have bearing on determination of total income - Protective assessments - Right to copy of sworn statements and opportunity for cross-examination

Assessment under Section 153C - Recording of satisfaction as a jurisdictional fact - Year-wise nexus between seized material and assessment year - Distinction between Section 153A and Section 153C - Validity of notices and assessments under Section 153C where the satisfaction note does not identify seized material year-wise - HELD THAT: - The Court held that Section 153C, as amended, makes the recording of satisfaction by the receiving Assessing Officer a jurisdictional prerequisite and requires the officer to apply his mind year-wise to ascertain the specific assessment year(s) to which the incriminating material relates. There is a clear statutory and conceptual distinction between Sections 153A and 153C: issuance of notices under Section 153A to the searched person is mandatory upon search, whereas Section 153C requires two satisfactions - by the officer of the searched person and by the receiving officer - that the seized material relates to the third party and bears on determination of total income for specific assessment year(s). The receiving officer cannot mechanically issue notices for the entire block without a year-wise nexus; notices must follow an exercise of analysis and ascertainment and may be issued only for those years for which the requisite nexus is established. The Court rejected the revenue's contention that seizure of material relatable to any one year automatically authorises notices for the whole block of six years absent a year-specific satisfaction.

Notices/assessments under Section 153C are invalid insofar as they relate to assessment year(s) for which the receiving Assessing Officer has not recorded a clear year-wise satisfaction that the seized material bears on determination of total income.

Requirement that seized material have bearing on determination of total income - Protective assessments - Consequent remedy where assessments under Section 153C extend to years not supported by seized material or by the satisfaction note - HELD THAT: - The Court directed that assessing authorities shall collate the satisfaction notes and records and apply the legal conclusion reached by the Court: assessments for those years where no incriminating material has been recorded as relating to the assessee must be quashed. The Court declined to itself undertake the year-wise factual verification across all files and left it to the jurisdictional Assessing Officers to identify years lacking the required nexus and pass consequential orders quashing those assessments. Where assessments are protective and the substantive assessment against the primary person is pending or has not resulted in a pursued demand, that circumstance was noted in the reasoning but does not obviate the requirement of year-wise satisfaction under Section 153C.

Assessing Officers to quash assessments for years not supported by year-specific incriminating material and to pass consequential orders in conformity with this judgment.

Right to copy of sworn statements and opportunity for cross-examination - Procedural right to confrontation where sworn statements are relied upon in assessment proceedings - HELD THAT: - The Court reaffirmed that where the assessing authority relies on sworn statements of third parties in making additions, the assessee is entitled to receive copies of those sworn statements and, if requested, an opportunity to cross-examine the declarants. In the petition of Rajan Narasimulu Jayaprakash the Assessing Officer passed assessments without granting the requested opportunity to cross-examine persons whose sworn statements were relied upon. The Court directed that the appellate authority shall remedy this procedural defect by ensuring an effective opportunity for cross examination prior to final adjudication on appeal (or as otherwise appropriate under the statutory appellate process).

Where sworn statements are relied upon, assessee must be furnished copies and, if sought, be afforded an opportunity for cross-examination; appellate authority to ensure this remedy in the present case.

Delay in handing over seized material - Challenge based on alleged delay in transfer of seized material beyond statutory period - HELD THAT: - The Court noted that challenges on the ground of delay in handing over seized material had been considered adversely to the petitioners in earlier proceedings (WP Nos.35076 et al.) and those decisions were relied upon; accordingly, the writ petitions premised solely on delay in transfer of seized material were dismissed in light of the earlier order and pending appeals. The Court did not reopen that factual-legal conclusion in these matters.

Writ petitions challenging assessments on the sole ground of delay in transfer of seized material dismissed where earlier order adverse to petitioner governs.

Final Conclusion: The High Court held that Section 153C requires a receiving Assessing Officer to record a year wise satisfaction linking seized material to the specific assessment year(s) for which notices are issued; notices and assessments under Section 153C lacking such year wise nexus must be quashed. Assessing Officers are directed to collate satisfaction notes and quash assessments for years unsupported by incriminating material. Where sworn statements are relied upon, assessees must be furnished copies and, if requested, allowed cross examination; appellate authorities are directed to remedy failures in this regard. Petitions founded solely on alleged delay in transfer of seized material were dismissed in view of earlier adverse orders.

Penalty under section 271(1)(c) of the Income-tax Act - Concealment of income - Furnishing inaccurate particulars of income - Disallowance of expenses for want of evidence - Assessment authority's satisfaction as prerequisite for penalty

Penalty under section 271(1)(c) of the Income-tax Act - Concealment of income - Furnishing inaccurate particulars of income - Disallowance of expenses for want of evidence - Assessment authority's satisfaction as prerequisite for penalty - Whether the penalty under section 271(1)(c) is sustainable in respect of the assessee for A.Y. 2013-14 to 2016-17. - HELD THAT: - The Tribunal examined the assessment and penalty orders together with the first appellate authority's order. The assessing officer initially initiated proceedings on the basis of concealment of income but ultimately levied penalty for furnishing inaccurate particulars of income, indicating uncertainty as to which limb of section 271(1)(c) was applied. The AO had allowed 75% of the claimed expenses while disallowing the remaining 25% for want of evidence; had the AO considered the assessee to be running a clandestine business, he would have disallowed the entire expenditure. The allowance of a substantial portion of expenses demonstrates that the AO was satisfied as to the genuineness of most expenses, and yet proceeded to levy penalty only on the portion disallowed. In view of these facts and the lack of clear satisfaction by the AO under either limb of section 271(1)(c), the Tribunal found the cases unsuitable for imposition of penalty. [Paras 8, 9, 10]

Penalty levied under section 271(1)(c) deleted; appeals allowed.

Final Conclusion: The Tribunal set aside the penalty imposed under section 271(1)(c) for A.Y. 2013-14 to 2016-17 and allowed the assessee's appeals, directing deletion of the impugned penalties.

Shift of burden of proof under Section 123 of the Customs Act - authenticity of invoices as evidence to prove licit import - power of Customs to summon and investigate authenticity of documents - remand for verification to appellate fact finding authority - role of CESTAT as last fact finding authority

Authenticity of invoices as evidence to prove licit import - power of Customs to summon and investigate authenticity of documents - role of CESTAT as last fact finding authority - Whether the appellate forum ought to have examined and recorded satisfaction as to the authenticity of purchase invoices produced by the assessee before deciding the appeal. - HELD THAT: - The High Court noted that the Additional Commissioner of Customs recorded that the assessee had produced purchase bills and invoices showing the source of the seized gold. The CESTAT accepted that the invoices were produced in reply to the show cause notice and observed that the Department had no opportunity to investigate their authenticity. The High Court held that, since the invoices were available before the Order in Original and the Customs Department has the statutory authority to summon and investigate the source and authenticity of documents, the CESTAT - being the last fact finding authority - ought to have satisfied itself as to the authenticity of those invoices before adjudicating the appeal. For that reason the Court remitted the matter to the CESTAT with a direction to record its satisfaction regarding authenticity, calling for a report from the Additional Commissioner of Customs if necessary, and thereafter to decide the appeal on merits. [Paras 8, 9, 10]

Matter remitted to CESTAT to verify and record satisfaction as to authenticity of the invoices (by calling for report from the Additional Commissioner if required) and thereafter to consider the appeal on merits.

Shift of burden of proof under Section 123 of the Customs Act - remand for verification to appellate fact finding authority - Whether Section 123 (shifting burden to the person from whom goods are seized to prove they are not smuggled) was correctly applied where goods were first seized by Income Tax authorities and later dealt with by Customs/DRI. - HELD THAT: - The High Court framed the question raised but did not decide the legal proposition on merits. Having concluded that the authenticity of the invoices must first be verified by the appellate authority, the Court declined to adjudicate the applicability or effect of Section 123 at this stage. The Court therefore kept all contentions open and remitted the case to the CESTAT to deal with the applicability of Section 123 after completion of the directed verification of documents and appropriate factual findings. [Paras 3, 4, 10]

Question as to applicability of Section 123 not finally decided; kept open and to be considered by CESTAT after verification of invoices and factual enquiry.

Final Conclusion: Appeal disposed of by remitting the matter to the CESTAT with directions to verify and record satisfaction as to the authenticity of the invoices (calling for a report from the Additional Commissioner of Customs if required) and thereafter to consider and decide the appeal on merits; all contentions left open; no costs.

Use of imported goods at loan licensee's factory - end use condition for concessional import - ownership of imported goods retained by importer - distinction between "importer" and "manufacturer" under IGCR Rules - registration/recording of additional place of business as fulfilment of manufacturer particulars - definition of "actual user" in foreign trade policy including jobbing units - precedential application of Tribunal decisions on job work and concessional import

Use of imported goods at loan licensee's factory - end use condition for concessional import - ownership of imported goods retained by importer - distinction between "importer" and "manufacturer" under IGCR Rules - registration/recording of additional place of business as fulfilment of manufacturer particulars - precedential application of Tribunal decisions on job work and concessional import - Entitlement to Notification No.50/2017 Cus benefit where duty free imports were used at the factory of a loan licensee (job worker) and not at the importer's own factory. - HELD THAT: - The Tribunal held that the exemption's end use condition is satisfied where the imported goods were used on behalf of the importer in the loan licensee's factory while the ownership of the goods remained with the importer from import to use in the final product. The IGCR Rules and the Notification do not mandate physical use in an importer owned factory; the rules contemplate separate notions of "importer" and "manufacturer" and require particulars of the manufacturer (name and address), which the appellant furnished by declaring the loan licensee. The loan licensee's premises were specified in the bonds, and were registered as an additional place of business under GST, meeting the requirement of a definitive address and demonstrating that the importer complied with procedural safeguards (bonds and bank guarantees). The Tribunal applied prior Tribunal authority (notably FDC Ltd. and related decisions) holding that use by a loan licensee on behalf of an importer, with ownership retained by the importer, fulfills the policy and legal requirements for concessional import for manufacture, and that literal insistence on ownership of the physical factory would frustrate the objective of the Notification. On this basis the denial of benefit solely because manufacture occurred at the loan licensee's premises was set aside and the appellant held entitled to the exemption. [Paras 5, 6, 9, 12, 14]

Benefit of Notification No.50/2017 Cus cannot be denied merely because the imported goods were used at the loan licensee's factory; the appellant was entitled to the exemption and the impugned order was set aside.

Limitation/period of limitation for show cause notice - absence of willful suppression, misstatement or fraud - Validity of the Show Cause Notice dated 23.9.2020 insofar as limitation is concerned for imports during 15.09.2017 to 25.03.2019. - HELD THAT: - The Tribunal observed that the Show Cause Notice was partly time barred. It noted that the appellant had disclosed material particulars (intention to use loan licensee, execution of bonds and bank guarantees) and there was no suggestion of willful suppression, misstatement or fraud; consequently, the extended limitation period under Section 28 of the Customs Act was not applicable. This factual and legal conclusion on limitation was taken into account while deciding the appeal. [Paras 10]

The Show Cause Notice was partly time barred and the extended limitation period was not attracted in the absence of fraud or suppression.

Final Conclusion: The appeal is allowed: the appellant is entitled to the concessional import benefit under Notification No.50/2017 Cus for the imports made between 15.09.2017 and 25.03.2019 despite manufacture at the loan licensee's premises, and the impugned order is set aside with consequential relief; the Show Cause Notice was also held partly time barred in the absence of fraud.

Acknowledgement under Section 18 of the Limitation Act - limitation for filing an application under Section 7 of the Code - balance sheets and directors' reports as evidence of acknowledgment - revival/remand of Section 7 application for fresh adjudication - res judicata and prior judicial consideration of balance-sheet entries

Acknowledgement under Section 18 of the Limitation Act - balance sheets and directors' reports as evidence of acknowledgment - limitation for filing an application under Section 7 of the Code - Whether the Section 7 application was barred by limitation or was saved by acknowledgements in the corporate debtor's balance sheets under Section 18 of the Limitation Act. - HELD THAT: - The Tribunal examined the series of balance sheets and directors' reports of the corporate debtor (including entries from 1998-99 through 2020-21) and applied the test in Asset Reconstruction Company India Ltd. v. Vishal Jaiswal to determine whether entries were unequivocal acknowledgements. The notes to the accounts and directors' statements repeatedly recorded that the company had failed to repay the loan, referred to the assignment and subsequent litigation, and reiterated the existence of the credit facilities and the assignee. The Tribunal held that such recurring entries and statements were sufficient to constitute acknowledgements within the meaning of Section 18, thereby giving rise to fresh periods of limitation on each acknowledgement. The mere fact that litigation details and caveats appeared in the notes to accounts did not strip those balance-sheet entries of their value for the purpose of Section 18. On this basis the Adjudicating Authority's conclusion that the application was time-barred was held to be erroneous. [Paras 23, 29]

Balance-sheet entries and directors' reports constituted continuous acknowledgements under Section 18 and the Section 7 application was not barred by limitation.

Res judicata and prior judicial consideration of balance-sheet entries - balance sheets and directors' reports as evidence of acknowledgment - Whether the Division Bench of the Delhi High Court's observations in the winding-up appeal operate as a bar (res judicata) to re-examination of the balance sheets for the purpose of limitation under Section 18. - HELD THAT: - The Tribunal considered the Division Bench's paragraph that the notes to accounts showed disputed liabilities and that the High Court declined to entertain winding-up. It found that those observations were made in the context of exercising discretion in winding-up proceedings and did not decide, nor purport to decide, the specific legal question whether balance-sheet entries amounted to an acknowledgement under Section 18 of the Limitation Act. Consequently, the earlier decision did not foreclose re-examination of the balance sheets on the limitation point in these proceedings. [Paras 28]

The Division Bench's observations in the winding-up appeal do not operate as res judicata on the question of whether balance-sheet entries constitute acknowledgements under Section 18; the issue could be revisited.

Revival/remand of Section 7 application for fresh adjudication - limitation for filing an application under Section 7 of the Code - What consequential order should follow upon finding that the Section 7 application was not time-barred. - HELD THAT: - Having concluded that the Section 7 application was not barred by limitation because of continuous acknowledgements, the Tribunal set aside the Adjudicating Authority's order dismissing the petition and directed that the Section 7 application be revived and heard afresh. The Tribunal gave the corporate debtor three weeks to file its reply before the Adjudicating Authority and left further adjudication to be carried out in accordance with law. [Paras 29]

Order of the Adjudicating Authority dismissed as barred by limitation set aside; Section 7 application revived and remitted for fresh hearing, with three weeks granted to the corporate debtor to file a reply.

Final Conclusion: The Tribunal allowed the appeal, holding that recurring entries in the corporate debtor's balance sheets and directors' reports amounted to acknowledgements under Section 18 of the Limitation Act and therefore the Section 7 application was not time barred; the Adjudicating Authority's order dated 06.06.2022 was set aside, the Section 7 application revived and remitted for fresh hearing, and the corporate debtor was granted three weeks to file its reply.

Maintainability of petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 - operational debt - debt simpliciter - settlement agreement antedated, unstamped and unregistered - limitation bar to recovery under original MOU - IBC is not a recovery mechanism

Settlement agreement antedated, unstamped and unregistered - reliability of documents relied upon by operational creditor - Validity and reliance on the Settlement Agreement dated 01.11.2018 for establishing debt due and payable - HELD THAT: - The Tribunal found that the Settlement Agreement relied upon by the Operational Creditor was dated 01.11.2018 yet recites payments and dates (including a residual payment on or before 31.03.2018) antecedent to that date, thereby demonstrating that the document was antedated. The agreement was also noted to be unstamped and unregistered. Consequently the Adjudicating Authority correctly treated the Settlement Agreement as unreliable for establishing an enforceable debt to sustain a petition under the Code. The Tribunal also observed that criminal complaints under the Negotiable Instruments Act preceded the statutory demand notice, indicating pre-existing disputes addressed in other fora, further weakening reliance on the Settlement Agreement as a basis for Section 9 relief. [Paras 6, 10, 11]

The Settlement Agreement cannot be relied upon to establish a debt due and payable for purposes of a Section 9 petition.

Operational debt - debt simpliciter - limitation bar to recovery under original MOU - IBC is not a recovery mechanism - Whether the claims arising from the MOU/Settlement constitute an operational debt maintainable under Section 9 of the Code - HELD THAT: - The Tribunal held that the original MOU dated 10.09.2005, insofar as it gave rise to any claim, was barred by limitation. Even if the Settlement Agreement were considered, the claims arising thereunder had lost the character of an operational debt and had become a debt simpliciter. The Tribunal reiterated the settled principle that the Code is not a recovery mechanism and that the definition of operational debt cannot be stretched to encompass contractual claims which do not pertain to the provision of goods or services within the narrowly intended scope. Accordingly, the petition filed under Section 9 for recovery of the disputed amounts (including interest) was held not maintainable under the Code and more appropriately the subject of civil proceedings. [Paras 12, 14]

Claims arising from the MOU/Settlement do not constitute operational debt for Section 9 purposes; the Section 9 petition is not maintainable.

Final Conclusion: The appeal is dismissed. The Adjudicating Authority rightly rejected reliance on the antedated, unstamped and unregistered Settlement Agreement and correctly held that the claims do not qualify as operational debt under the Code, rendering the Section 9 petition unsustainable; no costs.

Attraction of Section 73A - collection of amount as representing service tax - requirement of actual collection from recipient to invoke Section 73A(2) - evidentiary value of recipient's certificate - insufficiency of internal calculation sheets to prove collection - adjustment or refund mechanism under Section 73A(5)-(6) - limitation not determinative where merits favour the assessee

Attraction of Section 73A - collection of amount as representing service tax - requirement of actual collection from recipient to invoke Section 73A(2) - evidentiary value of recipient's certificate - insufficiency of internal calculation sheets to prove collection - Whether the provisions of Section 73A(2) are attracted on the facts where it is alleged that the assessee collected service tax from customers but did not deposit it to the Government. - HELD THAT: - The Tribunal examined Section 73A and held that sub section (2) applies only where a person has collected an amount from any other person in any manner as representing service tax. The adjudicating authority itself recorded that no bills or invoices showing collection of service tax were raised by the appellant. A certificate from the recipient (M/s PACL) expressly stated that no service tax was charged by the appellant. The Department relied on isolated calculation sheets recovered during search, but the Tribunal found these sheets could not be corroborated with invoices or transactions and were insufficient to establish that any amount was collected from customers as service tax. In consequence, the essential factual predicate for invoking Section 73A(2) - actual collection from the recipient as representing service tax - was not established, and the demand confirmed under that provision could not be sustained.

Section 73A(2) is not attracted on the facts; the demand confirmed on that basis is set aside.

Final Conclusion: Appeal of M/s Pearls Buildwell Infrastructure Limited allowed; departmental appeal dismissed.

Renting of Immovable Property service - exclusion where activity is by or to a religious body - Meaning and legal characterisation of a 'religious body' in taxation law - Negative list-based levy of service tax (effect from 01.07.2012) - Invocation of extended period of limitation in presence of bona fide constitutional dispute - Onus of proof - burden on Revenue to establish applicability of levy; burden on assessee for claiming exemption - Interest liability runs automatically by operation of law; penalties discretionary and liable to be set aside where extended period unjustified

Renting of Immovable Property service - exclusion where activity is by or to a religious body - Meaning and legal characterisation of a 'religious body' in taxation law - Public charitable society vs religious body - Whether the Diocese of Tanjore Society is a 'religious body' for the purposes of exclusion from 'Renting of Immovable Property service' and hence not leviable to service tax prior to 01.07.2012 - HELD THAT: - The Tribunal examined the Society's memorandum of association, the statement recorded from the Secretary of the Diocese and the nature of activities (religious, educational, charitable and other social activities primarily for Catholics though not excluding others). Noting that the Finance Act does not define 'religious body', the Tribunal applied the ordinary/common parlance meaning of organisational religious entities and relevant precedents which treat organisations infused with religious character as 'religious bodies'. A Diocese, being the territorial jurisdiction under a bishop and engaged in propagation and administration of religion, was found to be infused with the character of a religious body. The Tribunal rejected Revenue's contention that registration as a public charitable and educational society precludes being a religious body, relying on authority that charitable purposes include advancement of religion and that an entity can be both charitable and religious. On this basis, the Tribunal held that renting by the Diocese fell within the statutory exclusion under section 65(90a) and therefore the Diocese was not liable to service tax for the period prior to the introduction of the negative list levy on 01.07.2012. The appellant's concession and registration for liability from 01.07.2012 was noted. [Paras 5]

The Diocese is a 'religious body' for the purposes of section 65(90a) and renting of immovable property by the Diocese is not leviable to service tax before 01/07/2012; service tax liability arises from 01/07/2012.

Invocation of extended period of limitation in presence of bona fide constitutional dispute - Onus of proof - burden on Revenue to establish applicability of levy - Interest liability and penalties - Whether the department could invoke the extended period for assessment and whether penalties and interest should be sustained - HELD THAT: - The Tribunal observed that the period in dispute involved constitutional and interpretational questions concerning the scope of taxing entry and retrospective amendments that were, during the relevant period, the subject of litigation including directions to await determination by a larger bench of the Supreme Court. In such circumstances the owners had a bona fide belief that the activity might not attract service tax and invocation of the extended period was unjustified. The Tribunal held that interest arises automatically on duty and therefore is payable for any tax found due within the normal period; however, penalties imposed by the adjudicating authority in respect of the extended period were set aside. Consequently the demand and interest were confined to the normal period and all penalties were remitted. [Paras 5, 6, 7]

Extended period invocation not justified; demand and interest restricted to the normal assessment period; penalties set aside.

Final Conclusion: The impugned adjudication is modified: the Diocese is held to be a 'religious body' and renting of its immovable property is not taxable prior to 01.07.2012; service tax liability is confined to periods from 01.07.2012, demand and interest limited to the normal period, and all penalties imposed are set aside. The appeal is allowed on these terms with consequential relief as per law.

Repair and maintenance service characterised as works contract - exemption under Notification No. 25/2012-S.T. read with Section 102 - original works including commissioning of equipment - liquidated damages not being 'consideration' for taxable service - invocation of extended period of limitation for suppression/intent to evade

Repair and maintenance service characterised as works contract - exemption under Notification No. 25/2012-S.T. read with Section 102 - original works including commissioning of equipment - Demand of Service Tax on overhauling/repair and maintenance charges - HELD THAT: - The Tribunal examined Sl. No. 12(a) of Notification No. 25/2012-S.T. and the concept of 'original works' (which includes commissioning of equipment) under Rule 2A of the Valuation Rules. The services were rendered exclusively to the Government and were for repair/maintenance/alteration of original works not consumed in commerce or industry. The adjudicating authority's reasoning that only a 'standalone' equipment or the magnitude of work would determine exemption was rejected: the Notification does not prescribe a minimum magnitude. Having regard to the factual finding that the activity was re-engineering/overhauling of sub-assemblies supplied to the Ministry of Defence and that VAT had been discharged on the transaction, the Tribunal concluded that the services fall within the exemption and that the demand on overhauling/repair and maintenance charges cannot be sustained for the period in dispute. [Paras 14, 18]

Demand on repair and maintenance/overhauling charges is set aside.

Liquidated damages not being 'consideration' for taxable service - exemption under Notification No. 25/2012-S.T. read with Section 102 - Demand of Service Tax on liquidated damages collected - HELD THAT: - The Tribunal reviewed precedent of multiple CESTAT Benches which held that liquidated damages are not 'consideration' under Section 2(d) of the Indian Contract Act for the purpose of Service Tax. The Board's Circular No. 214/1/2023 confirming non-pursuance of Civil Appeals reinforced that line of authority. Applying these decisions to the facts, the Tribunal held that the demand of Service Tax on liquidated damages could not be sustained for the periods considered. [Paras 15, 18]

Demand on liquidated damages for the specified periods is set aside.

Invocation of extended period of limitation for suppression/intent to evade - Validity of invoking extended period of limitation - HELD THAT: - The original authority invoked the proviso to extend limitation, alleging wilful suppression and intent to evade tax because the appellant did not disclose the service component and recovery of liquidated damages in returns. The Tribunal found that the dispute involved complex questions of statutory interpretation and that the assessee was a Government undertaking rendering services to another government entity; therefore, allegations of suppression with intent to evade could not be sustained. On this basis the extended period invocation was held unjustified. [Paras 16, 17, 18]

Invocation of the extended period of limitation is not justified.

Final Conclusion: The impugned Order-in-Original is set aside; the appeals are allowed - demands on overhauling/repair and maintenance charges and on liquidated damages are quashed, and invocation of the extended period of limitation is held improper, with consequential relief as per law.

Eligibility for refund/rebate under Notification No. 41/2012-S.T. - remand for de novo adjudication - scope of remand - time bar/limitation for new claim - requirement of a speaking order

Eligibility for refund/rebate under Notification No. 41/2012-S.T. - time bar/limitation for new claim - Whether the appellant was eligible for refund/rebate under Notification No. 41/2012-S.T. and whether the claim made under that Notification is time barred - HELD THAT: - The Tribunal found that the Revenue's challenge raised prima facie questions on the assessee's entitlement under Notification No. 41/2012 and that earlier orders had set aside the rejection of claims for de novo consideration. Given that the matters had been remanded for fresh adjudication, the Tribunal did not decide the merits on eligibility or limitation but considered it appropriate that the Commissioner (Appeals) determine, afresh, the appellant's eligibility under Notification No. 41/2012-S.T. alone. The Tribunal therefore remitted the question of entitlement and any limitation defence to the appellate authority for adjudication and a speaking order. [Paras 7, 9]

Remanded for fresh adjudication on eligibility under Notification No. 41/2012-S.T.; merits and limitation left open for determination by the Commissioner (Appeals).

Scope of remand - remand for de novo adjudication - requirement of a speaking order - Whether the original authority exceeded the scope of the Tribunal's remand and whether it was entitled to examine and apply the correct Notification during de novo proceedings - HELD THAT: - The Tribunal held that its earlier directions required the original authority to examine evidence and pleadings on both facts and law and to apply the proper law when passing a reasoned order. Consequently, the original authority was entitled to consider the correct Notification if that ground was placed before it during the remand proceedings. However, since the Commissioner (Appeals) had allowed the Revenue's appeal, the Tribunal set aside that appellate order and remitted the matter to the Commissioner (Appeals) to pass a de novo, speaking order after affording opportunities to both parties. [Paras 7, 10]

Held that the remand empowered fresh consideration of appropriate legal grounds; set aside the impugned appellate order and directed de novo, speaking adjudication by the Commissioner (Appeals).

Final Conclusion: The common impugned Order in Appeal is set aside and the appeals are allowed by way of remand. The matters are remitted to the Commissioner (Appeals) to decide, within ninety days, the appellant's eligibility under Notification No. 41/2012 S.T. alone and to pass a reasoned speaking order after affording appropriate opportunities to both parties; all other contentions are left open for adjudication.

Supply of Tangible Goods Service - transfer of right to use, possession and effective control - deemed sale under Article 366(29A)(d) of the Constitution - mutual exclusivity of VAT/Sales Tax and Service Tax on the same transaction - CBEC Circular No. 334/1/2008-TRU (classification guidance on supply of tangible goods for use)

Supply of Tangible Goods Service - transfer of right to use, possession and effective control - Whether supply of DG sets on rent to the appellant's clients falls within the taxable category of "Supply of Tangible Goods Service". - HELD THAT: - The Tribunal analysed the terms of the lease/ rental agreements and found that the DG sets were delivered to the clients for a fixed period, permanently installed at the clients' premises, and operated at the client's discretion. The agreements conferred on the client the right to use, possession and effective control during the tenure, with the client bearing operational responsibilities (e.g., fuel, obtaining permissions) and the appellant's involvement limited to technical assistance, operators and repair/maintenance as required. Applying the test of transfer of right to use/possession and effective control, and the attributes identified by the courts for such transfer, the Tribunal concluded that the right of possession and effective control passed to the clients. Consequently the activity did not fall within the definition of "Supply of Tangible Goods Service" which covers supply for use without transfer of possession and effective control. [Paras 4]

Supply of DG sets on the facts found does not constitute "Supply of Tangible Goods Service" because the right of possession and effective control was transferred to the clients.

Deemed sale under Article 366(29A)(d) of the Constitution - mutual exclusivity of VAT/Sales Tax and Service Tax on the same transaction - CBEC Circular No. 334/1/2008-TRU (classification guidance on supply of tangible goods for use) - Whether the transaction, being subjected to VAT and treated as a deemed sale, excludes liability to service tax. - HELD THAT: - The Tribunal observed that transfer of right to use goods is included within the definition of 'sale' for State VAT and that Article 366(29A)(d) treats transfer of the right to use goods as a deemed sale. The CBEC circular reproduced in the order clarifies that transactions on which VAT/sales tax is payable or paid as deemed sale are not covered under the "Supply of Tangible Goods Service". The appellant had been registered under the Gujarat VAT Act and discharging VAT on such leasing (noted since 2007-08). On these facts, the Tribunal held that the transaction is a deemed sale and, being within the VAT domain, is not subject to service tax. [Paras 4]

The supply of DG sets, being treated as a deemed sale and subject to VAT, is not liable to service tax.

Provision of operator and maintenance - transfer of possession and effective control - Whether provision of operator and undertaking repair/maintenance by the appellant prevents transfer of possession and effective control and thus renders the arrangement taxable as a service. - HELD THAT: - The Tribunal considered the department's contention that supplying operators and performing repair/maintenance meant the appellant retained effective control. It found that supplying technical personnel and maintenance due to the appellant's expertise does not alter the contractual transfer of possession and control to the client; operational decisions (including switching on/off, usage pattern and integration with plant) rested with the client. Reliance was placed on contract terms and precedents showing that provision of manpower for operation or maintenance, without retention of legal possession or control, does not convert the transaction into a "supply of tangible goods for use" under the service tax head. [Paras 4]

Provision of operator and maintenance by the appellant did not preclude transfer of possession and effective control; therefore those acts did not render the arrangement taxable as "Supply of Tangible Goods Service".

Final Conclusion: The Tribunal set aside the impugned orders and allowed the appeals: on the facts and contractual terms the DG set supplies involved transfer of possession and effective control and, being treated as deemed sale and subject to VAT, are not liable to service tax.

Proportionate reversal of Cenvat credit on inputs and input services - Removal of inputs as such - Trading of goods as exempted service - Maintenance of separate accounts for exempted and taxable services - Liability under Rule 6(3) of the Cenvat Credit Rules, 2004

Proportionate reversal of Cenvat credit on inputs and input services - Removal of inputs as such - Whether reversal of proportionate Cenvat credit on inputs and on input services was required and sufficient where inputs were removed as such and trading of inputs was undertaken. - HELD THAT: - The Tribunal found as an admitted fact from the books that the appellants carried on trading of coal and had removed inputs as such. While the appellants reversed Cenvat credit on inputs cleared as such, the revenue's case was that proportionate credit attributable to input services used in providing the exempted trading service also required reversal. Applying the Cenvat regime, the Tribunal held that proportionate reversal of Cenvat credit on inputs cleared as such together with reversal of proportionate credit relating to input services used for the trading activity meets the statutory requirement. The Tribunal distinguished authorities relied upon by the appellant as addressing different factual situations (where the controversy was confined to clearance of inputs as such), whereas the present case concerned provision of an exempted service (trading) and attributable input services. Having regard to those distinctions, the Tribunal concluded that proportionate reversal already effected was sufficient. [Paras 5, 6, 8]

Proportionate reversal of Cenvat credit on inputs and on input services used for the trading activity was required and the reversal already made was sufficient.

Trading of goods as exempted service - Maintenance of separate accounts for exempted and taxable services - Liability under Rule 6(3) of the Cenvat Credit Rules, 2004 - Whether the appellant was liable to pay the specified percentage (6%/10%) under Rule 6(3) for not maintaining separate accounts for taxable and exempted services. - HELD THAT: - The revenue contended that because the appellant performed exempted trading services and did not maintain separate accounts, liability to pay the prescribed percentage arose. The Tribunal observed that since the appellant had reversed Cenvat credit on inputs cleared as such and had proportionately reversed credit attributable to input services for the exempted trading activity, the statutory purpose of segregation and denial of credit was satisfied. Thus, non-maintenance of separate accounts did not independently give rise to the demand for payment of 6%/10% where proportionate reversal had been effected. The Tribunal therefore found no requirement to impose the additional payment under Rule 6(3) once proportionate reversal was made. [Paras 7, 9]

No liability to pay 6%/10% under Rule 6(3) arises where proportionate reversal of Cenvat credit on inputs and input services for the exempted trading activity has been effected.

Final Conclusion: The appeal is disposed of by holding that proportionate reversal of Cenvat credit on inputs and on input services used for the exempted trading activity (trading of coal) satisfies the statutory requirement and, consequently, no separate liability to pay 6%/10% under Rule 6(3) arises for non-maintenance of separate accounts.

Export of goods under bond/LUT without payment of duty - no condition of receipt of export proceeds for free of cost (FOC) exports - show cause notice as foundation of departmental case - limits on reliance beyond SCN - RBI master circular not a ground for imposing excise duty in absence of allegation in SCN - penalty not sustainable in absence of willful suppression or deliberate wrongdoing

Export of goods under bond/LUT without payment of duty - no condition of receipt of export proceeds for free of cost (FOC) exports - Legality of demand of excise duty for goods exported free of cost without receipt of foreign currency - HELD THAT: - The Tribunal held that Rule 19 of the Central Excise Rules, 2002 permits export under bond/LUT without payment of duty subject to prescribed procedure, and Notification No. 42/2001 C.E. (N.T.) prescribes that procedure. Neither the Rule nor the notification contains any condition requiring receipt of export proceeds in foreign currency for FOC exports. The records (including Form A.R.E.1 and invoices stating goods were promotional trade samples on no returnable basis) showed exports had no commercial value and no sale proceeds were realized. As there was no allegation that the goods were not exported out of India within any stipulated period, the demand of duty foregone could not be sustained. [Paras 6, 7, 8, 9]

Demand of excise duty in respect of the FOC exports without receipt of foreign currency was not sustainable and is set aside.

Show cause notice as foundation of departmental case - limits on reliance beyond SCN - RBI master circular not a ground for imposing excise duty in absence of allegation in SCN - Validity of reliance on RBI Master Circular as basis for demand when not pleaded in the show cause notice - HELD THAT: - The Tribunal found that the adjudicating authority relied upon RBI Master Circular No. 14/2012 13 for the first time in the impugned order though no such allegation or reliance was made in the show cause notice. A show cause notice is the foundation of the departmental case and the department cannot travel beyond the grounds set out therein. Reliance on the RBI circular, which governs exchange control procedures, cannot be used to reinterpret or override the Central Excise exemption procedure prescribed by statute and notification where it was not pleaded. [Paras 10]

Reliance on the RBI Master Circular as a basis for demand was unjustified since it was not the subject of the show cause notice; the impugned order travelled beyond the SCN and cannot be sustained.

Penalty not sustainable in absence of willful suppression or deliberate wrongdoing - Sustainability of penalty imposed for alleged improper availment of credit and export of samples on FOC basis - HELD THAT: - The Tribunal observed that exports were made in compliance with Rule 19 and the relevant notification, the department raised no objection at the time of export or on submission of documents, and there was a bona fide belief by the appellant in entitlement to Cenvat credit. In these circumstances, and given that the substantive demand itself was unsustainable, the imposition of equal penalty (under the rules cited in the impugned order) could not be upheld in the absence of any finding of willful suppression or deliberate wrongdoing. [Paras 6, 11]

Penalty impugned in the order is not sustainable and is set aside along with the demand.

Final Conclusion: The appeal is allowed; the impugned order confirming duty, interest and equal penalty is set aside and the appellant is entitled to consequential relief as per law.

Exemption under Customs Notification No. 21/2002-CUS - concessional computation of excise duty under Notification No. 23/2003-CE - treatment of finished goods of 100% EOU for excise calculation - irrelevance of duty rate on imported raw materials to dutyability of finished goods

Exemption under Customs Notification No. 21/2002-CUS - treatment of finished goods of 100% EOU for excise calculation - Whether the finished goods manufactured by the appellant, a 100% EOU, are eligible for exemption under Notification No. 21/2002-CUS Sr. No. 228 when supplied to M/s Bharat Oman Refineries Ltd. for setting up a crude petroleum refinery, for the purpose of computing excise duty under Notification No. 23/2003-CE. - HELD THAT: - The Tribunal observed that Notification No.21/2002-CUS grants exemption to goods specified in the list when they are meant for a crude petroleum refinery and that the notification does not stipulate documentary requirements beyond proof that the goods are for such use. On the material before it, the appellant prima facie established that the steel pipes were supplied to M/s Bharat Oman Refineries Ltd. for use in setting up a crude petroleum refinery. The Tribunal held that the question of the applicability of Notification No.21/2002-CUS to the finished goods requires fresh consideration by the Adjudicating Authority and directed that the Adjudicating Authority should determine satisfaction of the qualifying fact (that the goods were meant for the refinery) and then apply Notification No.21/2002-CUS in computing excise under Notification No.23/2003-CE. [Paras 4]

Issue remanded to the Adjudicating Authority for fresh consideration of eligibility under Notification No.21/2002-CUS after verification that the finished goods were supplied for setting up the crude petroleum refinery.

Irrelevance of duty rate on imported raw materials to dutyability of finished goods - concessional computation of excise duty under Notification No. 23/2003-CE - Whether the Adjudicating Authority was correct in denying benefit by focusing on the 'nil' customs duty on raw materials imported by the appellant. - HELD THAT: - The Tribunal held that the Adjudicating Authority erred in basing its denial on the fact that major raw material (steel plates) was imported at 'Nil' rate under a separate notification. The determinative inquiry is the dutyability and applicable concession on the finished excisable goods when cleared from a 100% EOU, not the rate at which the appellant imported raw materials. The Adjudicating Authority's reliance on the import duty rate of raw materials was therefore irrelevant and founded on a wrong interpretation of the notifications. [Paras 4]

Adjudicating Authority's finding that benefit is excluded because raw materials were imported at 'Nil' rate is incorrect and set aside.

Final Conclusion: The impugned order is set aside and the appeal is allowed to the extent that the matter is remanded to the Adjudicating Authority for de novo consideration of eligibility under Notification No.21/2002-CUS (and consequent computation under Notification No.23/2003-CE) after verification that the finished goods were supplied for setting up the crude petroleum refinery; the Adjudicating Authority's contrary finding based on the 'nil' duty on imported raw materials is rejected.

Exemption under Notification No.6/2006-CE and Notification No.12/2012-CE - ownership of chassis and transfer of title - sale and purchase - related persons / inter-connected undertakings - extended period of limitation / invocation of longer period

Exemption under Notification No.6/2006-CE and Notification No.12/2012-CE - ownership of chassis and transfer of title - sale and purchase - related persons / inter-connected undertakings - Whether the appellants were entitled to exemption under Notification No.6/2006-CE and Notification No.12/2012-CE in respect of body-building on chassis supplied by M/s Volvo India Pvt. Ltd. - HELD THAT: - The Tribunal held that ownership is a legal concept denoting a bundle of rights including exclusive possession, use and disposal. On the facts the chassis were sold by VIPL to the appellants and delivered on payment of the price with applicable VAT and excise duty; there was no condition in the sale indicating that transfer of title or possession was incomplete. The mere fact that the companies belong to the same group or that agreements between group entities exist does not, by itself, prevent transfer of ownership on a completed sale. Reliance on the concept of "related person" or "inter-connected undertakings" under Section 4 of the Central Excise Act to treat ownership as continuing with the chassis manufacturer was held to be out of context for determining the applicability of the Notification. Clauses in the technology licence and supply agreements did not establish that legal ownership continued to vest in VIPL after sale and delivery. Applying these conclusions, the Tribunal found that the appellants satisfied the condition that the chassis were not retained in ownership by the chassis manufacturer and therefore were eligible for the exemption under the cited Notifications. [Paras 11, 12, 13, 14]

The appellants are entitled to the benefit of the exemption under Notification No.6/2006-CE and Notification No.12/2012-CE in respect of the body-building activity on the chassis sold and delivered by VIPL.

Extended period of limitation / invocation of longer period - suppression of facts - Whether the demand was barred by limitation and whether extended period was invocable. - HELD THAT: - The Tribunal noted that the appellants had informed the Department by letter dated 30.01.2008 about their body-building activity on duty-paid chassis purchased from VIPL and had sought registration; the Assistant Commissioner replied that registration was not required for exempt goods. Further, records had been examined by DGCEI in February 2010 without objection to the exemption claim. In these circumstances the Tribunal held that there was no established suppression of facts warranting invocation of the extended period, and the extended period was not justified. [Paras 15]

The demand based on invocation of the extended period is not sustainable; the claim is within time.

Final Conclusion: The impugned Order-in-original is set aside: the appellants succeed on the merits that the exemption under Notifications No.6/2006-CE and No.12/2012-CE is admissible for body-building on chassis sold and delivered by VIPL, and the extended period of limitation is not invocable; consequential relief, if any, shall follow as per law.

Exemption under Notification No.67/95-CE - discharge the obligation under Rule 6 of Cenvat Credit Rules, 2004 - exemption under Notification No.6/2006-CE - captively consumed intermediate goods - application of Rule 6(6)(vii) - eligibility for exemption

Exemption under Notification No.67/95-CE - discharge the obligation under Rule 6 of Cenvat Credit Rules, 2004 - application of Rule 6(6)(vii) - captively consumed intermediate goods - Whether duty could be demanded on relays and control panels captively consumed/cleared without payment of duty on the ground that the manufacturer did not 'discharge the obligation' under Rule 6 of the Cenvat Credit Rules, 2004 and thereby lost benefit of Notification No.67/95-CE. - HELD THAT: - The Tribunal found that the appellants manufactured both dutiable and exempt final products but had complied with the conditions of Rule 6 of the Cenvat Credit Rules, 2004. The factual matrix placed the appellants within the scope of clause (vii) of Rule 6(6), which excludes the obligation to reverse credit or pay the fixed percentage for the clearances in question. The impugned orders were therefore self-contradictory where the original authority recorded non-applicability of the Rule yet confirmed demand for failure to 'discharge the obligation'. The Tribunal followed earlier precedent in the appellant's own case reported as 2019-TIOL-1265-CESTAT-MAD and other decisions holding that where the conditions of Rule 6 (specifically clause (vii) of Rule 6(6)) are satisfied, the provision requiring payment of percentage does not apply and the assessee remains eligible for the exemption under Notification No.67/95-CE. Applying that reasoning to the periods under challenge, the demand for excise duty could not be sustained.

The demands confirmed by the original authority and Commissioner (Appeals) were set aside; the appeals are allowed.

Final Conclusion: Following the Tribunal's earlier decision in the appellant's own case, and on finding that the appellant complied with Rule 6 (including clause (vii) of Rule 6(6)), the confirmed duty demands for the specified periods were unsustainable and are set aside; appeals are allowed with consequential relief, if any.

Validity of retrospective cancellation of C-Forms - Effect of C-Forms on concessional central sales tax - Reassessment under the Haryana Value Added Tax Act, 2003 - Authority to proceed against purchasing dealer subject to statutory due process

Validity of retrospective cancellation of C-Forms - Effect of C-Forms on concessional central sales tax - C-Forms issued by the Sales Tax Department to the purchasing dealer (Ghanshyam Industries) cannot be cancelled retrospectively so as to affect the petitioner's sales made on the basis of those forms. - HELD THAT: - The Court observed that the question of retrospective cancellation of C-Forms is not res integra and is covered by earlier decisions of this Court. Counsel for the respondents accepted that those precedents govern the present controversy. Applying the settled law, the Court held that the C-Forms issued to the purchasing dealer could not be retrospectively cancelled so as to invalidate the concessional central sales tax treatment claimed by the petitioner on sales effected against those declarations. The Court therefore directed that the concerned authorities shall act consistently with those decisions and refrain from cancelling the C-Forms in question.

Petition allowed; the C-Forms issued to the purchasing dealer cannot be cancelled retrospectively and the authorities shall act accordingly.

Authority to proceed against purchasing dealer subject to statutory due process - Reassessment under the Haryana Value Added Tax Act, 2003 - The respondents are not precluded from initiating proceedings against the purchasing dealer for any statutory infraction, provided such proceedings are conducted in accordance with law. - HELD THAT: - While restraining retrospective cancellation of the C-Forms vis-a -vis the petitioner, the Court clarified that its order does not bar the tax authorities from pursuing lawful action against the purchasing dealer if there exists a statutory breach. Any such action must, however, comply with applicable legal procedures and statutory safeguards; the Court limited its relief to protecting the petitioner from the retrospective withdrawal of the C-Forms.

Respondents remain free to proceed against the purchasing dealer for any statutory infraction, subject to compliance with law.

Final Conclusion: Writ petition allowed: C-Forms issued to the purchasing dealer cannot be cancelled retrospectively so as to affect the petitioner's concessional CST treatment; authorities may nevertheless pursue lawful action against the purchasing dealer in accordance with law.

Assessment and rectification under the TNGST Act, 1959 - Maintainability of a second rectification application - Power of revenue officers to re-quantify assessments in rectification proceedings - Appeal against revised assessment order - Stay of recovery pending disposal of appeal

Maintainability of a second rectification application - Power of revenue officers to re-quantify assessments in rectification proceedings - Second rectification application under Section 55(4) of the TNGST Act and the forum for re-quantification in rectification proceedings - HELD THAT: - The Court observed that the correctness of re-quantification carried out in the rectification proceedings is a matter to be determined by the revenue officers in the statutory hierarchy under the TNGST Act, 1959. In that context the Court recorded that the filing of a second rectification application under Section 55(4) cannot be countenanced. The determinative position expressed is that re-quantification issues fall to be considered and adjudicated by the officers empowered under the Act, and the remedy of a second rectification petition is not permissible in the circumstances before the Court. [Paras 5]

Second rectification application under Section 55(4) cannot be countenanced; re-quantification must be dealt with by the competent officers under the TNGST Act.

Appeal against revised assessment order - Stay of recovery pending disposal of appeal - Whether the petitioner may be permitted to challenge the revised assessment orders dated 19.03.2012 and the effect of such challenge on the impugned recovery proceedings - HELD THAT: - The Court held that the revised assessment orders dated 19.03.2012 are appealable under the TNGST Act, 1959 and granted the petitioner liberty to file appeals against those orders within thirty days from receipt of the copy of the order. The Court directed that the Appellate Authority shall dispose of the appeals as expeditiously as possible, noting the antiquity of the Assessment Years involved. While the appeals are pending, the Court ordered that the impugned recovery proceedings shall be kept in abeyance. The order records that the petitioner has already paid a sum pursuant to an earlier direction, and specifies the procedural consequence if the petitioner fails to institute the appeals within the stipulated time. [Paras 7, 8, 9]

Liberty granted to file appeals against the revised assessment orders within thirty days; recovery proceedings stayed pending disposal of those appeals; failure to appeal within time will render the stay order revoked and permit respondent to proceed with recovery.

Final Conclusion: Writ petition disposed by permitting the petitioner to file appeals against the revised assessment orders dated 19.03.2012 for AY 2004-2005 and 2005-2006 within thirty days; appellate authority directed to dispose expeditiously; impugned recovery proceedings stayed pending appeal; second rectification petition not countenanced; failure to file appeals within the prescribed time will revive recovery.

Alternative efficacious remedy - maintainability of writ petition - relegation to statutory forum - pre-deposit condition - Section 65(2) of the Gujarat Value Added Tax Act, 1969 - second appeal to Commissioner or Tribunal

Alternative efficacious remedy - maintainability of writ petition - Section 65(2) of the Gujarat Value Added Tax Act, 1969 - second appeal to Commissioner or Tribunal - relegation to statutory forum - The writ petition challenging assessment and appellate orders is not maintainable in view of the availability of an efficacious alternative remedy under Section 65(2) of the Gujarat Value Added Tax Act, 1969, and the petitioners are to be relegated to the Tribunal. - HELD THAT: - The Court found that Sub-section (2) of Section 65 provides a statutory second-appeal remedy to the appellant, either to the Commissioner or to the Tribunal. Given the availability of this efficacious alternative remedy, the High Court concluded that the petitioners' challenge by writ was not maintainable and that the ends of justice would be met if the petitioners pursued their grievances before the Tribunal. The Court observed that matters concerning pre-deposit, if raised before the Tribunal, are to be decided by the Tribunal in accordance with law. The High Court expressly refrained from expressing any opinion on the merits of the assessment or appellate orders and kept all contentions open for adjudication by the statutory forum.

Writ petition dismissed and petitioners directed to approach the Tribunal under Section 65(2); question of pre-deposit left open; no opinion expressed on merits.

Final Conclusion: The petition is disposed of by relegating the petitioners to the statutory second-appeal remedy under Section 65(2) of the Gujarat Value Added Tax Act, 1969; the Tribunal shall consider any application regarding pre-deposit and adjudicate the merits afresh.

Dishonour of cheque under Section 138 of the Negotiable Instruments Act - Punjab Registration of Money Lenders Act, 1938 - bar on suits by unregistered money lenders - Doctrine of harmonious construction - Summons trial procedure under Chapter XX of the Code of Criminal Procedure - Examination under Section 165 of the Indian Evidence Act - Maintainability of criminal revision before the High Court

Dishonour of cheque under Section 138 of the Negotiable Instruments Act - Punjab Registration of Money Lenders Act, 1938 - bar on suits by unregistered money lenders - Doctrine of harmonious construction - Whether a complainant who is carrying on money lending business without a licence is barred from instituting and prosecuting a complaint under Section 138 of the Negotiable Instruments Act - HELD THAT: - The court held that Section 3 of the Punjab Registration of Money Lenders Act, 1938, which regulates and may bar civil suits by unregistered money lenders, does not oust or limit the operation of Section 138 of the Negotiable Instruments Act. The statutes operate in separate spheres - the 1938 Act being regulatory of money lending and civil recovery, and Chapter XVII of the NI Act being criminal in nature to protect the sanctity of cheques. Applying the doctrine of harmonious construction, both provisions are to be given effect without nullifying each other. Precedents of various High Courts and the Supreme Court were examined to conclude that lending money without a licence does not per se render a Section 138 complaint non maintainable; the complainant need only establish the ingredients of Section 138. Occasional advances or absence of a profit motive negates characterization as a professional money lender; even if so characterised regulatory consequences under the 1938 Act do not automatically defeat criminal proceedings under Section 138 where the statutory ingredients are otherwise satisfied. [Paras 11, 12]

A person without a money lending licence is not automatically debarred from instituting or prosecuting a complaint under Section 138 of the Negotiable Instruments Act; Section 3 of the 1938 Act does not override or negate the criminal remedy under Section 138.

Summons trial procedure under Chapter XX of the Code of Criminal Procedure - Examination under Section 165 of the Indian Evidence Act - Maintainability of criminal revision before the High Court - Whether the trial court was entitled to dismiss multiple Section 138 complaints at a pre trial stage on the basis of the complainant's statements recorded under Section 165 and a showcause notice, and whether those dismissal orders were amenable to revision before the High Court - HELD THAT: - The court found that the trial court adopted an incorrect procedure alien to Chapter XX Cr.P.C. after having taken cognizance and issued process: it examined the complainant under Section 165, issued a showcause notice during the summons trial and then dismissed complaints without affording the complainant an opportunity to lead evidence and without conducting trial in accordance with law. Reliance on the Punjab Registration of Money Lenders Act, 1938 at the pre trial stage to dismiss the complaints was held to be a misapplication of law. The Supreme Court's pronouncements that Section 258 Cr.P.C. is not applicable to summons cases and that the magistrate cannot discharge accused in such a case once process under Section 204 Cr.P.C. is issued were applied to conclude that the trial court lacked jurisdiction to recall/process stage dismissals of the kind recorded. In view of palpable legal error and non application of judicial mind, revisional jurisdiction in the High Court was exercisable to correct the miscarriage of justice. [Paras 13, 14]

The trial court's pre trial dismissal of the complaints on the impugned grounds was illegal; the High Court set aside those orders and remanded the complaints for expeditious trial in accordance with law, and directed appearance for re assignment.

Final Conclusion: The impugned orders dated 15.07.2015 and 20.08.2015 dismissing certain Section 138 complaints were set aside; the High Court held that absence of a money lending licence does not automatically bar prosecution under Section 138 and that the trial court wrongly dismissed the complaints at the pre trial stage. The matters were remanded to the trial court for expeditious trial in accordance with law.