TaxTMI Updates e-Newsletter
Sep 24,2021

Reading down the proviso to Section 129(1) of the Central GST Act - right to hearing before detention or seizure - statutory remedy of appeal - effect of Supreme Court common order disposing of similar writ petitions

Effect of Supreme Court common order disposing of similar writ petitions - Present writ petition stands concluded by a Supreme Court order disposing of identical writ petitions and is accordingly dismissed. - HELD THAT: - The petition sought a writ reading down the proviso to Section 129(1) of the Central GST Act so as to require an opportunity of hearing before any order of detention or seizure. The State placed on record a Supreme Court order in Special Leave Petition (C) No.25291 of 2019 which recorded that all writ petitions pending before the High Court listed in the affidavit were deemed disposed of accordingly. The High Court found that, in view of that common order eliminating inconsistency and disposing of the listed High Court petitions, the present proceedings are terminated and must be dismissed.

Petition dismissed as concluded by the Supreme Court order.

Statutory remedy of appeal - Petitioner granted liberty to institute and/or pursue the statutory remedy of appeal against the impugned order if available and availed in accordance with law. - HELD THAT: - Although the writ petition is dismissed pursuant to the Supreme Court's common order, the High Court recorded the petitioner's request to be permitted to pursue the statutory appellate remedy. The State raised no objection to such pursuit provided the remedy is available and invoked in accordance with law. Consequently the Court dismissed the petition while expressly leaving open the petitioner's right to pursue statutory appeal remedies.

Liberty allowed to institute and/or pursue statutory appeal in accordance with law.

Final Conclusion: The writ petition is dismissed as concluded by the Supreme Court's common order disposing of identical petitions; the petitioner is granted liberty to pursue any available statutory appeal remedy in accordance with law.

Violation of principles of natural justice - personal hearing - show cause notice - maintainability of writ against penalty order where statutory appeal available - availability of efficacious alternative remedy - requirement of submission mode under Rule 26 read with Rule 142 of U.P. GST Rules, 2017 - appeal under Section 107 of the U.P. GST Act, 2017

Maintainability of writ against penalty order where statutory appeal available - availability of efficacious alternative remedy - appeal under Section 107 of the U.P. GST Act, 2017 - Whether the writ petition is maintainable notwithstanding availability of a statutory appeal under Section 107 of the U.P. GST Act, 2017 - HELD THAT: - The Court observed that the order imposing penalty is appealable under Section 107 of the U.P. GST Act, 2017 and that the petitioner has an efficacious statutory remedy. In view of the availability of that remedy, the Court declined to adjudicate the merits of the grievance in writ jurisdiction. The Court recorded that various questions raised by the petitioner, including contentions relating to hearing and reply to the show cause notice, can be ventilated before the Appellate Authority. Accordingly, the writ petition was dismissed without prejudice to the petitioner's right to pursue the statutory appeal.

Writ petition dismissed without prejudice; petitioner permitted to raise all contentions in appeal under Section 107 of the U.P. GST Act, 2017.

Show cause notice - violation of principles of natural justice - personal hearing - requirement of submission mode under Rule 26 read with Rule 142 of U.P. GST Rules, 2017 - Validity of the petitioner's procedural complaints concerning the show cause notice, the locus of filing the reply, and whether personal hearing was mandatory - HELD THAT: - The Court noted that a show cause notice had been issued and that the petitioner pointed to a document said to be a reply addressed to the Commissioner. The Court declined to determine whether such a filing satisfied the statutory requirements or whether absence of a personal hearing amounted to a breach of natural justice. It observed that the reply, if any, ought to have been submitted online and to the officer who issued the notice as per Rule 26 read with Rule 142 of the U.P. GST Rules, 2017, but refrained from resolving these contentions on the merits. These procedural and factual questions were left to be agitated and decided by the Appellate Authority in the statutory appeal.

Procedural complaints and questions about adequacy of hearing and the place/mode of filing the reply are left open for the Appellate Authority to decide in appeal; no adjudication on merits by this Court.

Final Conclusion: The High Court dismissed the writ petition without prejudice, holding that the petitioner should pursue the remedy of appeal under Section 107 of the U.P. GST Act, 2017; procedural and natural justice issues relating to the show cause notice and mode/place of filing the reply were not decided and are to be raised before the Appellate Authority.

Service of notice - principle of natural justice - procedural irregularity v. jurisdictional defect - availability of alternative remedy of appeal - entertainment of appeal and stay application

Service of notice - principle of natural justice - procedural irregularity v. jurisdictional defect - Challenge to the impugned order on grounds of inadequate service of show cause notice, absence of Form DRC-01A, and non mention of Relied Upon Documents raising alleged violation of natural justice. - HELD THAT: - The Court noted that soft copies of the show cause notice were served and that the petitioner's grievance was confined to non receipt of a physical (hard) copy. The defects alleged - including non issuance of Form DRC 01A and omission of details of demand or RUDs - were held to point to irregular exercise of jurisdiction or procedural infirmities rather than to an inherent lack of jurisdiction. In the absence of a contention that no notice at all was issued, and having regard to the availability of an alternative statutory remedy, the High Court declined to entertain the writ petition on merits.

Alleged defects in service and procedural irregularities do not establish lack of jurisdiction; writ petition not interfered with.

Availability of alternative remedy of appeal - entertainment of appeal and stay application - Whether the writ petition should be entertained despite the availability of the statutory remedy of appeal and stay. - HELD THAT: - The Court emphasised that the petitioner has an adequate remedy by way of appeal against the impugned order. Exercising restraint in writ adjudication where an alternative efficacious remedy exists, the Court directed that if the petitioner files an appeal along with a stay application within two weeks, the appellate authority may entertain it and consider the stay application on its own merits. The High Court therefore disposed of the writ petition without deciding the substantive merits.

Writ petition disposed; appellate remedy to be pursued and, if appeal with stay application is filed within two weeks, it shall be entertained on merits by the appellate forum.

Final Conclusion: Writ petition challenging the order dated 07.08.2021 dismissed without adjudication on merits; petitioner permitted to file an appeal with a stay application within two weeks, which the appellate authority is directed to entertain on its merits.

Anticipatory bail - inquiry under Section 70 of the Central Goods and Services Tax Act, 2017 - non-bailable and cognizable offence under Section 132 of the GST Act - personal liberty under Article 21 of the Constitution - judicial proceedings within the meaning of Sections 193 and 228 IPC - conditions for grant of pre-arrest protection (personal bond, indemnity bond, cooperation)

Anticipatory bail - inquiry under Section 70 of the Central Goods and Services Tax Act, 2017 - non-bailable and cognizable offence under Section 132 of the GST Act - conditions for grant of pre-arrest protection (personal bond, indemnity bond, cooperation) - personal liberty under Article 21 of the Constitution - Grant of anticipatory bail to the applicants during the pendency of inquiry under Section 70 of the GST Act and the terms on which such protection is to be granted - HELD THAT: - The Court found that an inquiry under Section 70(1) of the GST Act was pending against the applicants regarding alleged GST evasion (claimed by the department to be around Rs. 27 crore), and that the applicants were cooperating with the inquiry by furnishing documents, complying with interim directions (including virtual appearances), and depositing a sum as a gesture of bona fides. The Court noted that the inquiry was ongoing and that arrest was not necessary where the applicants cooperated; the personal liberty guaranteed under Article 21 requires that arrest not be automatic. The applicants had no prior criminal antecedents on record, had fixed residence and business addresses, and held good social standing; they could furnish sureties to ensure attendance. Balancing these facts against the cognizable, non-bailable nature of the offences alleged under Section 132 read with Section 132(5) of the GST Act, the Court exercised its power to grant anticipatory bail under Section 438 Cr.P.C., while protecting the department's right to continue the inquiry. To secure appearance and protect departmental interest, the Court imposed specific conditions including execution of a personal bond, an indemnity bond, availability for online interrogation, prohibition on tampering or influencing witnesses, and a mechanism for the Proper Officer to seek cancellation of bail if applicants fail to comply. The Proper Officer's conduct of the inquiry was to proceed unimpaired by the observations in the order. [Paras 13, 14, 15, 16]

Applicants are granted anticipatory bail until conclusion of the inquiry under Section 70(1) of the GST Act subject to execution of a personal bond and indemnity bond and compliance with specified conditions; the Proper Officer shall continue the inquiry in accordance with law.

Final Conclusion: Anticipatory bail granted to the seven applicants during the pending GST inquiry on their furnishing of a personal bond and indemnity bond and subject to conditions of cooperation; the departmental inquiry to continue unimpaired and the Proper Officer may move the Court for cancellation of the protection if conditions are breached.

Revocation of cancellation of registration - self-cancellation of GST registration - appeal under Section 107 of the CGST Act - time-bound disposal of appeal - input tax credit - technical assistance for online appeal

Revocation of cancellation of registration - self-cancellation of GST registration - Direction to respond to petitioner's communications seeking revocation of self-cancellation of GST registration - HELD THAT: - The Court recorded that the petitioner had inadvertently self-cancelled its GST registration and therefore became ineligible to file an online appeal. Noting the petitioner's communications dated 13th and 18th August, 2021 requesting revocation, the Court directed respondent no.2 to reply to those communications and consider the request for revocation so that the petitioner may regularise its registration status. The Court declined to enter into the merits of the underlying tax dispute because a physical appeal was pending and the relief sought was limited to expeditious administrative action. [Paras 7]

Respondent no.2 to reply to the petitioner's communications and consider revocation of the self-cancellation of registration.

Appeal under Section 107 of the CGST Act - time-bound disposal of appeal - input tax credit - Direction to dispose the pending appeal on merits within a time-frame in view of the impending cut-off for availing input tax credit - HELD THAT: - Recognising that the petitioner had filed a physical appeal which had not been allotted a number and that the statutory window for utilisation of input tax credit was closing (noted as 30th September, 2021), the Court directed respondent no.2, alternatively, to dispose of the appeal on merits while keeping the time constraint in view. The Court emphasised the need for expeditious disposal so that the recipient is not prejudiced in availing input tax credit due to administrative delay, without adjudicating the substantive merits itself. [Paras 7]

Respondent no.2 to dispose of the appeal on merits expeditiously, having regard to the time-limit for utilisation of input tax credit.

Technical assistance for online appeal - appeal under Section 107 of the CGST Act - Direction to provide written technical assistance to enable the petitioner to file the appeal online within a short period if technical difficulties exist - HELD THAT: - The Court anticipated possible technical impediments preventing online filing of the appeal and directed respondent no.2 to provide written guidance enabling the petitioner to prefer the appeal online within two weeks. This direction was given to ensure that procedural or technical hurdles do not by themselves defeat the petitioner's ability to pursue appellate remedy or to regularise registration status. [Paras 7]

In the event of technical difficulty, respondent no.2 to provide written guidance so the petitioner can file the appeal online within two weeks.

Final Conclusion: The petition is disposed by directing respondent no.2 to reply to the petitioner's revocation requests, or alternatively to dispose the pending appeal expeditiously in view of the input tax credit timeline, and to render written technical assistance for online filing within two weeks; the Court did not decide the substantive merits and permitted the petitioner to return if directions are not complied with.

Condonation of delay - Extension of prescribed period under Section 5 of the Limitation Act, 1963 - limitation - time barred revision - dismissal of revision petition for want of limitation

Condonation of delay - Extension of prescribed period under Section 5 of the Limitation Act, 1963 - limitation - sufficient cause - time barred revision - Application for condonation of delay under Section 5 of the Limitation Act dismissed and revision held to be time-barred. - HELD THAT: - The application alleged delay of 433 days in presenting the revision, attributing it to the petitioner's custody until 01.04.2020 and the subsequent COVID-19 pandemic. The trial court record showed that the petitioner and his counsel were actively participating in proceedings and were aware of the impugned order; no assertion was made that they lacked knowledge of the order. The Court found that the delay appeared deliberate and intentional, that the pleaded reasons did not constitute sufficient cause within the meaning of Section 5, and that the subsequent spread of COVID-19 could not retroactively excuse inaction when limitation had already expired. Consequently, there was no legally sufficient ground to extend the prescribed period. [Paras 7, 8, 9]

Application for condonation of delay dismissed; revision petition is time-barred and therefore dismissed.

Final Conclusion: The application for condonation of delay under Section 5 Limitation Act is refused; the revision, being filed after inordinate unexplained delay (433 days), is dismissed as time-barred and the record is directed to be returned to the trial court.

Regular bail - maintainability of bail where applicant is on interim bail - offences punishable under the CGST Act involving GST evasion by fraudulent means - prima facie evidence and gravity of allegations as factor in bail - voluntary statement under the CGST Act

Regular bail - prima facie evidence and gravity of allegations as factor in bail - voluntary statement under the CGST Act - Application for grant of regular bail to the applicant-accused Gaurav Kumar. - HELD THAT: - The complaint alleges large-scale GST evasion effected through creation and operation of fake firms and passing of inadmissible input tax credit, with an aggregate figure of evasion prima facie around Rs. 90 Crores disclosed in the investigation and reproduced in the complaint. The applicant is recorded to have given a voluntary statement to tax officers admitting registration of multiple fake firms and passing of substantial ITC through them. Having considered the seriousness of the offences alleged, the magnitude of the prima facie evasion as set out in the complaint and supporting material, and the attendant facts on record, the Court found no ground to accede to the prayer for regular bail. The order records no adjudication on merits of the allegations but rejects bail on the basis of the gravity of the case and the material before the court.

Bail application dismissed; no order on merits.

Maintainability of bail where applicant is on interim bail - Whether the instant regular bail application was maintainable in view of the applicant having been released on interim bail earlier. - HELD THAT: - The prosecution contended that the instant application was not maintainable because the applicant was not in custody, having been released on interim bail by a magistrate. The Court noted the prosecution's submission but, while recording that contention, reached its conclusion to dismiss the bail application on grounds of seriousness of allegations and available material. The order dismisses the application without reliance on any indulgence arising from interim bail and without pronouncing a substantive legal ruling on maintainability beyond noting the prosecution's stance.

Court dismissed the bail application while recording the prosecution's contention regarding interim bail; no definitive legal determination on maintainability was made.

Final Conclusion: Having regard to the gravity of the allegations, the material on record including the applicant's voluntary disclosures and the large prima facie figure of GST evasion, the Court found no ground to grant regular bail and dismissed the bail application without commenting on the merits.

Revocation of cancellation of registration - compliance with Rule 23 of the CGST Rules, 2017 - requirement to furnish returns and pay tax, interest, penalty and late fee before filing for revocation - satisfaction of the proper officer with reasons to be recorded in writing - CBCIC clarification on filing returns prior to revocation

Revocation of cancellation of registration - compliance with Rule 23 of the CGST Rules, 2017 - requirement to furnish returns and pay tax, interest, penalty and late fee before filing for revocation - Whether the appellant's application for revocation of cancellation of GST registration should be allowed in view of filing of returns and payment of tax, late fee and interest. - HELD THAT: - The Commissioner (Appeals) examined the material including the appellant's submissions, copies of challans and GSTR-3B returns and the provisions of Rule 23 of the CGST Rules, 2017 along with the Board's circular clarifying that where registration is cancelled for failure to furnish returns, returns due till the date of cancellation must be furnished and amounts due paid before filing for revocation. The appellant produced proof of filing GSTR-3B returns up to the date of cancellation and challans/DRC-03 evidencing payment of tax, late fee and interest including payment for the period May-2020 to December-2020. Having found that the appellant has substantially complied with the statutory pre-conditions for seeking revocation, the Commissioner (Appeals) held that the registration may be considered for revocation. The matter is remitted to the proper officer to verify the payment particulars of tax, late fee and interest and the status of returns and then to decide the revocation application in accordance with Rule 23, recording reasons in writing if the application is rejected. [Paras 5, 7, 10]

Appeal allowed; matter remitted to the proper officer to consider the application for revocation after due verification of payment particulars and returns.

Final Conclusion: The appeal is allowed and the Commissioner (Appeals) directs the proper officer to consider the appellant's application for revocation of cancellation of GST registration after verifying tax, late fee and interest payments and the status of returns, in accordance with Rule 23 of the CGST Rules, 2017.

Pendency of appeal under the Vivad Se Vishwas Act - Delayed appeal with condonation application

Pendency of appeal under the Vivad Se Vishwas Act - Delayed appeal with condonation application - An appeal filed beyond limitation along with an application for condonation of delay was to be treated as pending for the purposes of the Direct Tax Vivad Se Vishwas Act, 2020, and the declaration could not be rejected on the ground that there was no separate order condoning the delay. - HELD THAT: - The Court held that the communication issued by the Commissioner of Income Tax (Appeals) calling upon the petitioner to furnish ground-wise written submissions on the appeal showed that the appeal had been entertained, and, in that context, the objection that there was no order condoning delay was untenable. It further held that under Section 2(1)(a)(i) of the VSV Act, the requirement is that the appeal should be pending on the specified date, and not that it should have been formally admitted. Since the limitation for filing appeal expired on January 18, 2020, the appeal along with condonation application was filed on February 6, 2020, i.e. before the CBDT Circular dated December 4, 2020, and the declaration was filed within time, the case fell within question 59 of the Circular. Agreeing with the view in Shyam Sunder Sethi , the Court held that an appeal is pending from the time it is filed until it is disposed of, and admission cannot be equated with pendency. [Paras 4, 5, 7, 8, 9]

The rejection of the declaration under the VSV Act was held bad in law, and the authority was directed to process the forms filed by the petitioner.

Final Conclusion: The Court set aside the order rejecting the petitioner's declaration under the VSV Act and held that the appeal, though filed with a short delay and accompanied by a condonation application, was pending for the purposes of the scheme. The designated authority was directed to process the petitioner's forms under the Act.

Summary order. The petition under Article 226 challenging the notice dated 29.03.2019 under Section 148 for Assessment Year 2012-13 was withdrawn by counsel; the petition is disposed of as withdrawn, the notice is discharged and the interim relief is vacated.

Remand by the Tribunal - power of remand under Section 254 - burden of proof in unexplained credits/Section 68 - genuineness of share transactions and penny stock rigging - claim of exemption under Section 10(38) - tribunal as last fact-finding authority

Remand by the Tribunal - power of remand under Section 254 - tribunal as last fact-finding authority - Validity of the Tribunal's order remanding the matter to the Assessing Officer for fresh consideration when no fresh material was placed before it. - HELD THAT: - The Court held that the Tribunal's power to remand must be exercised sparingly and on judicial principles and only when facts or material before the Tribunal differ from those considered earlier or when it cannot fairly decide the issue on the available material. Where the Assessing Officer and the CIT(A) had conducted detailed enquiries, recorded specific factual findings about the off-market purchase, lack of corroborative evidence, returned service of notices, and artificially hiked prices, and the Tribunal did not point to any new material or show why it could not decide the factual issues on the record, the remand was unjustified. Reliance was placed on earlier decisions that remand is inappropriate where all evidence has been produced and lower authorities have given definite findings after full investigation. The Tribunal's remand was therefore set aside and the findings of the lower authorities restored. [Paras 5, 8, 26, 27, 29]

Tribunal's remand set aside; remand held unjustified where no fresh material warranted remand and lower authorities had given definite findings.

Burden of proof in unexplained credits/Section 68 - genuineness of share transactions and penny stock rigging - claim of exemption under Section 10(38) - Whether the Assessing Officer and CIT(A) were justified in treating the credited/sale proceeds as unexplained and rejecting the claim of exemption under Section 10(38) on the recorded facts. - HELD THAT: - The Court affirmed the legal position that the primary onus lies on the assessee to prove the identity, creditworthiness and genuineness of transactions (including share purchases and credits) to the satisfaction of the Assessing Officer under Section 68; only after prima facie discharge does the burden shift to the Revenue. Applying settled authorities, the Court noted that the AO and CIT(A) had conducted field enquiries, found returned notices, absence of distinctive documentary evidence, off-market transactions, and other indicia of engineered transactions and artificial price manipulation in penny stocks. Those factual conclusions were not disturbed by the Tribunal. In view of these findings and precedents emphasising close scrutiny of such transactions, the AO and CIT(A) were justified in treating the credits as unexplained and in rejecting the exemption claim under Section 10(38). [Paras 24, 25, 26]

Findings of the AO and CIT(A) upholding addition under Section 68 and rejecting exemption under Section 10(38) affirmed; onus on assessee held not discharged.

Final Conclusion: Appeal allowed; impugned order of the Tribunal is set aside, the order of the CIT(A) is restored and the substantial questions of law are answered in favour of the Revenue.

Refund with interest - prematurity of writ petitions where an alternative remedy exists - TRACES portal refund procedure - adjustment of refund towards pre-deposit in appeal - impleading of necessary party - Centralized Processing Cell handling of TDS refunds - time bound direction for administrative action

Refund with interest - TRACES portal refund procedure - prematurity of writ petitions where an alternative remedy exists - Writ petition was premature because the petitioner had an alternative administrative remedy to apply for refund (with interest) through the TRACES portal. - HELD THAT: - The Court recorded the Revenue's stance (paragraph 4 of the counter affidavit) that the statutory/administrative process for obtaining refund with interest requires the petitioner to first apply on the TRACES portal. Interest calculation and payment, according to the Revenue, follow the sequence and timelines linked to filing Form No.26B on TRACES and backend processing. Because that alternative mechanism was available, the Court accepted that approaching the High Court at that stage was premature and that the petitioner should pursue the TRACES remedy first. [Paras 5]

Petitioner directed to make the refund application on the TRACES portal within a fortnight.

Impleading of necessary party - Centralized Processing Cell handling of TDS refunds - time bound direction for administrative action - The Centralized Processing Cell (Deputy Director of Income Tax, Ghaziabad) which processes TDS refunds was impleaded and directed to act within a specified timeframe to complete the refund exercise as per the procedure stated in the counter affidavit. - HELD THAT: - The Revenue candidly acknowledged that the refund in question pertained to TDS and was pending with the Centralized Processing Cell at Ghaziabad; the Officer in charge was the Deputy Director of Income Tax. The Court, exercising its discretion, impleaded that authority as the third respondent and accepted the Revenue counsel's undertaking to accept notice for that office. The Court then issued a time bound administrative direction (reproducing the sequence of steps described in paragraph 4 of the counter affidavit) and fixed the schedule for completing the refund process. [Paras 6, 7]

Deputy Director, Centralized Processing Cell, Ghaziabad, impleaded as third respondent and directed to complete the refund process in accordance with paragraph 4 of the counter affidavit within 12 weeks.

Final Conclusion: Writ petitions disposed of: petitioner to apply for refund on TRACES within two weeks; Centralized Processing Cell (Deputy Director, Ghaziabad) impleaded and directed to process and complete the refund (with interest as per the counter affidavit procedure) within 12 weeks; no costs.

Deduction under Section 80P(2)(a)(i) for interest attributable to the business of providing credit facilities - deduction under Section 80P(2)(d) for interest earned from investments with other co-operative societies - income chargeable under the head "income from other sources" - deduction under Section 57 for expenditure incurred in earning income from other sources - status of a society registered under the Karnataka Souharda Sahakari Act, 1997 as a "co-operative society" for the purposes of Section 80P - precedential effect and applicability of Totagars Co-operative Sales Society (Supreme Court) and subsequent Karnataka High Court decisions

Deduction under Section 80P(2)(d) for interest earned from investments with other co-operative societies - income chargeable under the head "income from other sources" - Whether interest income earned on investments with co operative banks is eligible for deduction under Section 80P(2)(d) or is taxable as income from other sources. - HELD THAT: - The Tribunal reviewed the authorities, including the Supreme Court decision in Totagars Co operative Sale Society and the later decision of the Karnataka High Court in PRINCIPAL COMMISSIONER OF INCOME TAX & ANR. v. Totagars Co operative Sales Society, and the coordinate Tribunal decision in M/s. Vasavamba Co operative Society Ltd. The reasoning discerned is that interest earned on deposits with co operative banks is not of the nature specified in Section 80P(2)(a)(i) or (2)(d) and is chargeable under the head "income from other sources." The Karnataka High Court held that co operative banks, notwithstanding their cooperative character, carry on banking business and are excluded from the beneficial scope of Section 80P in many respects, and that the Supreme Court's Totagars decision applies to such interest. Applying those precedents, the Tribunal held that the assessee is not entitled to deduction under Section 80P(2)(d) in respect of interest from investments with co operative banks and therefore such interest is taxable under the head "income from other sources." [Paras 7]

Interest income from investments with co operative banks is not deductible under Section 80P(2)(d) and is taxable as income from other sources.

Deduction under Section 80P(2)(a)(i) for interest attributable to the business of providing credit facilities - income chargeable under the head "income from other sources" - Whether interest earned on investments made with co operative banks can be treated as income "attributable" to the business of providing credit facilities and hence eligible for deduction under Section 80P(2)(a)(i). - HELD THAT: - The Tribunal considered the distinction drawn by the Supreme Court in Totagars between interest earned in the course of providing credit to members and interest earned from investing surplus funds. While some High Court benches had read a wider meaning into "attributable," the Karnataka High Court (in the later Totagars decision) concluded that interest on deposits/investments with banks (including co operative banks) is not income from business and therefore not eligible for deduction under Section 80P(2)(a)(i). Following that binding jurisprudence and the coordinate Tribunal analysis in Vasavamba, the Tribunal held that interest from investments with co operative banks does not qualify for deduction under Section 80P(2)(a)(i). [Paras 7]

Interest from investments with co operative banks is not deductible under Section 80P(2)(a)(i).

Status of a society registered under the Karnataka Souharda Sahakari Act, 1997 as a "co-operative society" for the purposes of Section 80P - Whether a society registered under the Karnataka Souharda Sahakari Act, 1997 qualifies as a "co operative society" for the purposes of Section 80P. - HELD THAT: - The Tribunal observed that the CIT(A)'s conclusion that the assessee was not a co operative society within the meaning of the statute was incorrect in view of the Karnataka High Court decision in Swabhimani Souharda Credit Co operative Limited v. Government of India, which held that a society registered under the Karnataka Souharda Sahakari Act, 1997 is a co operative society for the purposes of Section 80P. Although this finding does not entitle the assessee to the specific subsection deductions challenged, the Tribunal corrected the legal status finding in favour of the assessee consistent with the High Court authority. [Paras 7]

A society registered under the Karnataka Souharda Sahakari Act, 1997 is a co operative society for the purposes of Section 80P.

Deduction under Section 57 for expenditure incurred in earning income from other sources - income chargeable under the head "income from other sources" - Whether, if the interest is taxed as income from other sources, the assessee is entitled to deduction of proportionate expenditure under Section 57. - HELD THAT: - Relying on the Karnataka High Court decision in Totagars Co operative Sales Society Ltd. v. ITO, the Tribunal recognised that once interest income is classified as income from other sources, the assessee is entitled to claim proportionate costs and administrative expenses incurred in earning that interest under Section 57. The assessee had not pressed this plea before the lower authorities, but the Tribunal held that the fundamental principle of taxing net income requires consideration of allowable expenditure. Consequently, the matter was restored to the file of the Assessing Officer for limited examination of whether the assessee incurred expenditure for earning the interest income assessed under Section 56 and, if proved, to allow deduction under Section 57. [Paras 7, 8]

Remanded to the Assessing Officer to examine and allow, if proved, proportionate expenditure under Section 57 in respect of interest income assessed as income from other sources.

Final Conclusion: The Tribunal held that interest earned on investments with co operative banks is not deductible under Section 80P(2)(a)(i) or 80P(2)(d) and is taxable as income from other sources; the assessee's status as a co operative society under the Karnataka Souharda Sahakari Act, 1997 was affirmed; and the appeals were restored to the Assessing Officer for the limited purpose of determining and allowing, if established, proportionate expenditure under Section 57 in respect of such interest income. Appeals allowed for statistical purposes.

Condonation of delay - rectification under section 154 of the Income-tax Act - credit for tax deducted at source under section 199 read with section 205 of the Income-tax Act - reliance on Form No. AS-26 / Form 26AS for TDS credit - direction to Assessing Officer to give effect to appellate order and afford reasonable opportunity of hearing

Condonation of delay - rectification under section 154 of the Income-tax Act - Legitimacy of condoning delay in filing the appeal to the Tribunal where a rectification application before the first appellate authority remained pending and COVID-19 lockdown contributed to further delay. - HELD THAT: - The assessee filed a rectification application within the due time before the first appellate authority and, because the CIT(A) did not adjudicate that rectification within a reasonable time, the assessee filed the present appeal belatedly. The affidavit of the managing partner and the facts that the rectification was filed within 32 days of the CIT(A)'s order and that the lockdown due to the COVID-19 pandemic impeded timely filing were accepted. The Tribunal found that the delay was not due to laches on the part of the assessee and constituted sufficient cause to justify condonation of the 448-day delay. On that basis the delay is condoned and the appeal is admitted for hearing on merits. [Paras 2]

Delay of 448 days in filing the appeal is condoned and the appeal is admitted for adjudication on merits.

Credit for tax deducted at source under section 199 read with section 205 of the Income-tax Act - reliance on Form No. AS-26 / Form 26AS for TDS credit - Whether the assessee is entitled to claim the full TDS credit shown in its returns/Form AS-26 for assessment year 2016-2017 and whether the Assessing Officer erred in limiting the credit. - HELD THAT: - The Tribunal examined the record, including the chart of TDS claimed and the Form AS-26 relied upon by the assessee. It noted that the Assessing Officer, while giving effect to the CIT(A)'s directions, granted TDS credit for a lesser amount than that claimed by the assessee but did not record reasons for such limitation. Applying the provisions of section 199 read with section 205 and having regard to the judicial precedents relied upon by the assessee, the Tribunal concluded that there was no justification on record for restricting the TDS credit to the amount allowed by the Assessing Officer. Consequently, the assessee is entitled to the benefit of the TDS claimed in respect of income disclosed for assessment year 2016-2017 subject to verification and compliance with the applicable provisions and rules (including Rule 37BA(iii) of the Income Tax Rules, 1962). [Paras 6]

Assessing Officer erred in limiting the TDS credit; the assessee is entitled to the TDS credit claimed subject to verification under the relevant provisions.

Direction to Assessing Officer to give effect to appellate order and afford reasonable opportunity of hearing - Whether the matter should be restored to the Assessing Officer for giving effect to the Tribunal's directions and for compliance with procedural safeguards. - HELD THAT: - The Tribunal observed that the Assessing Officer's order giving effect to the CIT(A)'s direction did not explain the basis for limiting the TDS credit. In view of the entitlement found in favour of the assessee, the Tribunal restored the issue to the file of the Assessing Officer for implementation. The Assessing Officer was directed to grant the benefit of the TDS claimed, to carry out necessary verification and computation, and to afford the assessee a reasonable opportunity of hearing before completing the action. [Paras 6, 7]

Issue restored to the Assessing Officer with directions to give effect to the TDS credit entitlement after verification and after affording the assessee a reasonable opportunity of hearing.

Final Conclusion: The delay in filing the appeal is condoned; on merits the Tribunal found that the Assessing Officer wrongly restricted the TDS credit and directed restoration to the Assessing Officer to grant the TDS credit claimed (in accordance with section 199 read with section 205 and applicable rules) after verification and after affording the assessee a reasonable opportunity of hearing; the appeal is allowed for statistical purposes.

Allowability of licence fee as revenue expenditure under section 37 - segregation and alienation of goodwill and its licenseability - disallowance on ground of diversion of profits / colourable device - ad hoc disallowance for alleged personal element in business travel

Allowability of licence fee as revenue expenditure under section 37 - segregation and alienation of goodwill and its licenseability - Deductibility of licence fee paid to RSCPL for use of the name, trade mark and goodwill of 'Remfry & Sagar'. - HELD THAT: - The Tribunal upheld the CIT(A)'s deletion of the AO's disallowance and held that the licence-fee payments made to RSCPL are allowable as expenditure wholly and exclusively for the purpose of the assessee's profession. The decision follows earlier coordinate-bench findings which examined the 5.6.2001 agreements (licence for use of goodwill and supporting services), the history of ownership and gifting of goodwill by Dr. V. Sagar to RSCPL, and relevant precedent treating such arrangements as licence/royalty rather than sale. The Tribunal found that the assessee could not have continued to practise under the name 'Remfry & Sagar' without the licence from the goodwill owner; the arrangement was documented, not shown to cause revenue loss, and did not amount to diversion of profits. The Revenue failed to identify distinguishing factual elements for the year under consideration vis-a -vis prior years decided in favour of the assessee. The Tribunal also observed that questions of contravention of the Advocates Act or Bar Council Rules were not matters for the ITAT to adjudicate and no legal authority was shown to render the arrangement invalid for tax deductibility purposes.

Licence fee paid to RSCPL is allowable as revenue expenditure under section 37; grounds 1 and 2 dismissed in favour of the assessee.

Ad hoc disallowance for alleged personal element in business travel - Validity of ad hoc 10% disallowance of foreign travel expenses on account of alleged personal element. - HELD THAT: - The Tribunal sustained the CIT(A)'s deletion of the AO's ad hoc 10% addition. It held that disallowance cannot rest on surmises when books of account are not disputed and there is no material to demonstrate personal element. The CIT(A) followed earlier years' orders allowing identical expenditure, and absent any challenge to the accounting records or specific contrary evidence, an ad hoc deduction is unsustainable in law.

Ad hoc 10% disallowance of foreign travel expenditure deleted; ground 3 determined against the Revenue.

Final Conclusion: The Revenue's appeal is dismissed; the Tribunal affirmed the CIT(A)'s allowance of the licence fee paid to RSCPL as deductible expenditure and the deletion of the ad hoc disallowance of foreign travel expenses for AY 2013-14.

Addition for bogus purchases - proof of identity, genuineness and creditworthiness of suppliers - acceptance of receipts in scrutiny assessment implies corresponding purchases - verification by banking channel of payments - admission of additional evidence under Rule 46A

Addition for bogus purchases - proof of identity, genuineness and creditworthiness of suppliers - verification by banking channel of payments - admission of additional evidence under Rule 46A - acceptance of receipts in scrutiny assessment implies corresponding purchases - Whether the CIT(A) was justified in reducing the Assessing Officer's addition for alleged bogus purchases and allowing the assessee's evidentiary material except in respect of purchases from one supplier. - HELD THAT: - The Tribunal found that during appellate proceedings the assessee produced, and the Assessing Officer did not ultimately dispute, detailed material identifying the suppliers (including addresses and PAN in most cases), evidence of payments through banking channels and bank statements, and confirmations of accounts. The CIT(A) admitted and examined this additional evidence in accordance with the procedure under Rule 46A and recorded that many of the parties were regular suppliers in earlier years and that receipts had been accepted in prior scrutiny assessments, which supported the genuineness of corresponding purchases. The Assessing Officer had relied in part on non-corresponding opening balances from earlier years and had not effectively controverted the newly produced records when called for a remand report. On this basis the CIT(A) reduced the addition substantially, leaving only the amount relating to purchases from M/s Apex Marketing Company which remained unsubstantiated. The Tribunal held that once receipts are accepted and payments are shown through banking channels, purchases made to achieve those receipts cannot be discarded on conjecture, and therefore the CIT(A)'s reduction of the addition (except as to the Apex transaction) was justified.

The CIT(A)'s reduction of the addition for bogus purchases to the extent accepted by him, leaving only the amount relating to M/s Apex Marketing Company disallowed, is upheld and the Revenue's appeal is dismissed.

Final Conclusion: The Revenue's appeal is dismissed; the appellate reduction of the Assessing Officer's addition for alleged bogus purchases is sustained except insofar as purchases from M/s Apex Marketing Company remain disallowed.

Exemption under section 54 of the Income-tax Act - concept of a "residential house" versus "residential unit" - treatment of adjoining/combined units as one residential house - amendment to section 54 w.e.f. 1st April, 2015 (one residential house) - principle of consistency with co ordinate Tribunal decisions

Exemption under section 54 of the Income-tax Act - concept of a "residential house" versus "residential unit" - treatment of adjoining/combined units as one residential house - amendment to section 54 w.e.f. 1st April, 2015 (one residential house) - principle of consistency with co ordinate Tribunal decisions - Whether the assessee is entitled to exemption under section 54 for capital gain reinvested in three adjacent flats treated as a single combined residential house despite the amendment specifying investment in "one residential house" - HELD THAT: - The assessee produced documentary evidence (sale deed, allotment letter and a single sale agreement) showing the three adjacent flats were acquired and constructed as a tailor made combined flat with single entry/exit and to be operated/maintained as a single residential unit. The Bench considered judicial authority holding that the phrase "residential house" does not preclude a building composed of several units being treated as one residential house for section 54/54F purposes, and noted a recent co ordinate Tribunal decision with closely similar facts in favour of the assessee. Applying the principle of consistency with the coordinate Bench and finding no material distinction in facts, the Tribunal held it would not deviate from that view and directed the Assessing Officer to allow the deduction claimed. The Tribunal therefore gave effect to the evidentiary fact of single combined residential use and followed precedent rather than disallowing the claim on the basis of separate registries alone.

Assessee entitled to exemption under section 54 for the three adjoining flats treated as one combined residential house; appeal allowed and Assessing Officer directed to allow the deduction.

Final Conclusion: Appeal allowed; deduction under section 54 to be granted in respect of the combined adjoining flats treated as one residential house and the Assessing Officer directed to give effect to the same.

Reopening of assessment under section 147/148 - addition on basis of loose papers and requirement of corroborative evidence - taxation of profit element only where unexplained receipts are not brought under sections 69/69A - cash payment disallowance under section 40A(3) - exceptions and burden of proof - disallowance based on conjecture and surmise is impermissible - notional interest

Reopening of assessment under section 147/148 - Validity of reopening of assessment under section 147/148 as challenged by the assessee. - HELD THAT: - The assessee did not address arguments on the ground challenging reopening. The Tribunal accordingly dismissed this ground of appeal without further adjudication on the merits of the validity of initiation of proceedings under sections 147/148. [Paras 3]

Ground challenging reopening dismissed for want of argument.

Addition on basis of loose papers and requirement of corroborative evidence - taxation of profit element only where unexplained receipts are not brought under sections 69/69A - Sustenance of addition of Rs. 19,17,500 made on the basis of entries in a loose diary seized during survey. - HELD THAT: - The Tribunal accepted the settled principle that additions cannot be made solely on the basis of entries in loose papers unless corroborative evidence exists. The AO had recorded that one of the diary entries (Rs. 75,000) was found in the books of account, which negates the contention that the diary entries were wholly imaginary. However, since the AO did not invoke sections 69/69A to treat the receipts as unexplained cash credits, the Tribunal held that the entire alleged receipt could not be taxed; only the profit element embedded in such receipts is taxable. Applying that principle, the Tribunal restricted the addition to 10% of the gross receipts shown in the diary. [Paras 6]

Addition reduced and restricted to Rs. 1,91,750 (10% of the gross receipts); remainder deleted.

Cash payment disallowance under section 40A(3) - exceptions and burden of proof - Sustenance of disallowance of expenditures where payments in cash exceeded the statutory limit. - HELD THAT: - The assessee bore the obligation to demonstrate that cash payments in excess of the prescribed limit fell within any exception under section 40A(3) and the rules thereunder. The assessee failed to establish applicability of any exception for the cash payments in question. On that basis, the Tribunal affirmed the findings of the authorities below holding the disallowance under section 40A(3) to be justified. [Paras 10]

Addition on account of disallowance under section 40A(3) upheld.

Notional interest - disallowance based on conjecture and surmise is impermissible - Validity of additions made as notional interest and ad-hoc disallowance of car, telephone and staff expenses. - HELD THAT: - The Tribunal found that both additions were made on the basis of conjectures and surmise without specific findings or evidentiary basis. Such guesswork-based disallowances are impermissible. Applying that legal principle, the Tribunal directed deletion of the addition made as notional interest and the adhoc disallowance relating to car, telephone and staff expenses. [Paras 14]

Additions of notional interest and ad-hoc disallowance deleted.

Final Conclusion: The appeal is partly allowed: the reopening ground was dismissed for lack of argument; the large diary-based addition was limited to the profit element at 10% of gross receipts; the disallowance under section 40A(3) was upheld; and the additions for notional interest and adhoc disallowance were deleted.

Unexplained money additions under section 69 - unexplained cash deposits as assessable unexplained income - estimation of agricultural income to explain cash balances - past savings from agricultural operations as source of unexplained deposits - reliance on Tribunal precedent for assessing per acre agricultural yield

Unexplained money additions under section 69 - unexplained cash deposits as assessable unexplained income - estimation of agricultural income to explain cash balances - past savings from agricultural operations as source of unexplained deposits - reliance on Tribunal precedent for assessing per acre agricultural yield - Validity of additions made by assessing officer and sustained by CIT(A) of Rs. 2,25,000 (purchase of demand draft in cash) and Rs. 10,25,484 (cash bank deposits) as unexplained money/income. - HELD THAT: - The Tribunal examined whether the assessee's ownership and consistent cultivation of 23 acres of agricultural land, together with conservative estimates of agricultural income and allowance for past savings, could satisfactorily explain the cash used to purchase the demand draft and the cash deposited in bank. The assessing officer had himself accepted agricultural income at Rs. 10,000 per acre and allowed commission income; the Tribunal took into account the assessee's contention and a co ordinate Tribunal decision which postulated higher per acre estimates (Rs. 22,000 per acre, and conservatively noted that even Rs. 15,000 per acre would yield substantial cumulative income over ten years). Applying a conservative per acre income estimate for the landholding and allowing for household expenditure, the Tribunal found that accumulated savings from agricultural operations were sufficient to account for the impugned cash transactions. On that basis the Tribunal concluded that the additions were not sustainable. [Paras 11, 12, 13, 14, 15]

Impugned additions of Rs. 2,25,000 and Rs. 10,25,484 are deleted; grounds relating to those additions are allowed.

Final Conclusion: The appeal is partly allowed: the Tribunal deleted the additions in respect of the cash purchase of a demand draft and cash bank deposits after accepting that past agricultural income and savings from 23 acres could reasonably explain the impugned amounts.

Validity of reopening proceedings under Section 147/148 - reliance on third-party incriminating documents from search proceedings - opportunity for cross-examination and principles of natural justice - deletion of addition based on unexplained investment

Validity of reopening proceedings under Section 147/148 - reliance on third-party incriminating documents from search proceedings - Assessee's challenge to the validity of reassessment proceedings reopening assessment under Section 147/148 was dismissed. - HELD THAT: - The Tribunal upheld the view of the CIT(A) that the Assessing Officer had specific information arising from search and seizure operations at Garha Group and Apollo Group which revealed transactions involving the assessee. The seized and incriminating documents, together with admissions/statements filed by the Garha Group before the Settlement Commission identifying payers of 'on-money' including the assessee, constituted sufficient material for issuing the notice under Section 148 and reopening the assessment. The Tribunal rejected the contention that proceedings should have been initiated under Section 153C or that reopening was otherwise invalid, observing that the AO was not precluded from issuing notice under Section 148 where such incriminating material and admissions came to light. On these facts the reassessment was held valid and the legal grounds challenging reopening were dismissed. [Paras 8, 9, 10]

Grounds 1 to 3 challenging the validity of reassessment proceedings dismissed; reopening under Section 148 sustained.

Opportunity for cross-examination and principles of natural justice - deletion of addition based on unexplained investment - Whether addition made on account of alleged 'on-money' could be sustained without providing the assessee opportunity to cross-examine third-party witnesses whose statements formed the basis of the addition. - HELD THAT: - The Tribunal found that the Assessing Officer's addition was founded on seized material and third-party statements from the searched parties, while the registered sale documents reflected consideration consistent with guideline values. The assessee had specifically sought opportunity to cross-examine the persons alleged to have received 'on-money', but no such opportunity was afforded. Applying the principle that reliance on third-party statements without affording the assessee a chance to test or discredit those statements violates principles of natural justice, and having regard to precedents which hold non-allowance of cross-examination to be a fatal flaw, the Tribunal held the addition unsustainable. Consequently, the addition on account of unexplained investment was deleted. As a result, grounds that became academic in consequence of deletion were not adjudicated on merit. [Paras 11, 12, 13, 14]

Addition of Rs. 36,46,175/- on account of alleged 'on-money' deleted for failure to afford opportunity of cross-examination; ground no.4 allowed.

Final Conclusion: The appeal is partly allowed: the reassessment under Section 147/148 was held valid and the legal challenge to reopening dismissed, but the addition based on third-party statements was deleted for violation of principles of natural justice by denying the assessee opportunity for cross-examination; the assessment is modified accordingly.

Revisional jurisdiction under section 263 - Reopening of assessment under section 147 - Eligibility of deduction under section 80IA(4) - Form 10CCB filing and timing - Application of Explanation 10 to section 43(1) regarding capital subsidy - Scope of reassessment and prohibition on roving enquiry - Penalty under section 271B and limitation

Revisional jurisdiction under section 263 - Reopening of assessment under section 147 - Eligibility of deduction under section 80IA(4) - Validity of PCIT's exercise of revisional jurisdiction under s.263 to set aside reassessment which had already examined and accepted the assessee's claim under s.80IA(4). - HELD THAT: - The Tribunal found that the AO had examined the claim of deduction under s.80IA(4) both in the original assessment (on the basis of revised/amalgamated accounts) and again during the reassessment proceedings under s.147; the reopening itself was for ascertaining the s.80IA(4) claim. Having been examined in two rounds and allowed after verification, the exercise of s.263 by the PCIT on the same grounds amounted to impermissible supervisory interference. The PCIT's direction for further verification on the identical issue, despite the record showing detailed enquiries and acceptance, was held to be contrary to law and akin to dislodging a plausible quasi judicial view of the AO without any fresh or material error warranting revision. [Paras 11]

Assumption of jurisdiction under s.263 on the s.80IA(4) claim was unwarranted and is quashed.

Form 10CCB filing and timing - Eligibility of deduction under section 80IA(4) - Whether Form 10CCB signed after the original return due date (because of a post-sanction amalgamation) rendered the deduction under s.80IA(4) ineligible and justified PCIT's direction for verification. - HELD THAT: - The Tribunal observed that the scheme of amalgamation was sanctioned by the High Court on 14.11.2011 with retrospective effect from 01.04.2008; consequently, preparation and signing of an amalgamated Form 10CCB necessarily post dated the due date for the original return. Given these peculiar facts, neither the assessee nor the AO could be faulted for the timing of the Form 10CCB. The AO had appropriately appreciated the circumstances and allowed the deduction after verification in two rounds. The PCIT's non specific directive to verify the revised Form 10CCB was found to be non speaking, unnecessary and indicative of a fishing inquiry rather than a legitimate exercise of revisional power. [Paras 11]

Direction to revisit the Form 10CCB timing and further verification on that ground is not intelligible or sustainable; the revisional action on this aspect is quashed.

Application of Explanation 10 to section 43(1) regarding capital subsidy - Scope of reassessment and prohibition on roving enquiry - Whether PCIT could direct AO in revisional proceedings to adjust depreciation by treating government sales tax deferment subsidy as capital subsidy under Explanation 10 to section 43(1), when that issue was not the subject matter of the reasons for reopening under s.147. - HELD THAT: - The Tribunal held that an AO in reopening proceedings under s.147 is not obligated to undertake a roving inquiry into peripheral issues not raised in the reasons for reopening; expanding reassessment to unrelated additions would be impermissible. The PCIT's direction to apply Explanation 10 to section 43(1) to compute asset cost was therefore improper where that issue was not the basis for reopening. On merits the assessee's pleaded case - that the subsidy (deferment of sales tax liability) was an incentive under industrial policy and not payment towards cost of any specific asset - was prima facie plausible and supported by precedent. Consequently, non adjustment of depreciation on the subsidy could not be characterised as an erroneous and prejudicial order warranting revision. [Paras 11]

PCIT's direction to revisit depreciation by treating the subsidy as capital in revisional proceedings was unjustified; the assumption of jurisdiction on this ground is quashed.

Penalty under section 271B and limitation - Whether PCIT could direct initiation of penalty under s.271B for failure to comply with s.44AB when such liability related to the original assessment and was therefore time barred for purposes of the revisional direction. - HELD THAT: - The Tribunal noted that any proceeding for penalty under s.271B would pertain to the original assessment dated 14.03.2014 when the return post amalgamation was filed; accordingly, the PCIT's show cause direction in revisional order seeking levy of penalty was time barred in the context of the revisional exercise. [Paras 12]

Direction relating to initiation of penalty under s.271B in the revisional order is time barred and unsustainable.

Final Conclusion: The Tribunal allowed the appeal, quashed the revisional order passed by the PCIT under s.263 insofar as it set aside the reassessment dated 06.12.2018 for AY 2011-12, and directed that the PCIT's directions for further verification and for initiation of penalty proceedings be set aside.

Validity of assessment of a Hindu Undivided Family after its prior disruption - Applicability of the deeming fiction in hitherto assessed provision to assess a disrupted HUF - Section 171 - machinery for deeming a family to continue as undivided - Protective assessment in the status of HUF to safeguard revenue

Validity of assessment of a Hindu Undivided Family after its prior disruption - Section 171 - machinery for deeming a family to continue as undivided - Assessment made on the HUF for AY 2002-03 when the HUF had been partitioned prior to the date of assessment and had never been hitherto assessed as a HUF - HELD THAT: - The Tribunal accepted as fact that the HUF was partitioned on 14.01.2005 (registered 12.02.2005) prior to the assessment order dated 30.11.2006. The Karnataka High Court decision in CIT v. Lakanna & Sons establishes that an undivided family which has become divided by the time of assessment cannot be taxed as an HUF because no undivided family exists at the date of assessment. Section 171 creates a deeming fiction only for a "Hindu family hitherto assessed as undivided" and supplies the machinery to treat such a family as continuing undivided until an order under that section is made. Where the family was never earlier assessed as an HUF, the deeming fiction in Section 171(1) cannot be invoked; there is no alternate machinery in the Act to assess a disrupted HUF which was not previously assessed as undivided. The Tribunal applied these principles and relied on authorities holding that assessments on a HUF after its disruption, in the absence of the Section 171 machinery being applicable, are irregular and without jurisdiction. The protective nature of the AO's assessment (to safeguard revenue) did not cure the absence of jurisdiction when the HUF no longer existed and was not hitherto assessed. For these reasons the assessment in the status of HUF was held invalid and annulled. [Paras 16, 17, 18, 20, 21]

Assessment made on 30.11.2006 in the status of the HUF is invalid and is annulled

Final Conclusion: The appeal is allowed: the protective assessment completed in the status of the HUF for AY 2002-03 is held invalid and annulled because the HUF had been disrupted prior to the assessment and had not been hitherto assessed so as to attract the deeming provision of Section 171.

Independence of penalty proceedings under Sections 271D and 271E from assessment proceedings - penalty for contravention of Section 269SS and Section 269T - limitation and applicability of Section 275 categories to penalty proceedings - remand for fresh consideration on merits

Independence of penalty proceedings under Sections 271D and 271E from assessment proceedings - penalty for contravention of Section 269SS and Section 269T - CIT(A) was not justified in quashing penalties under Sections 271D and 271E on the sole ground that the assessment orders, during the course of which penalty proceedings were initiated, were held to be invalid. - HELD THAT: - The Tribunal held that penalties under Sections 271D and 271E are independent proceedings and are not vitiated merely because the assessment proceedings during which the default was noticed have been quashed. The decision draws upon the reasoning in Hissaria Bros and subsequent judicial pronouncements that defaults under Sections 269SS/269T give rise to independent penalty proceedings; completion, modification or annulment of the assessment proceedings does not, by itself, render the penalty proceedings unsustainable. The CIT(A)'s cancellation of the penalty orders solely on the ground of invalidity of the corresponding assessments was therefore incorrect. The Tribunal observed that the orders annulling assessments were not final and that the statutory scheme contemplates separate consideration of penalties which may fall under the distinct categories of Section 275 limitation rules, but the core principle remains that Sections 271D and 271E penalties are not necessarily linked to the fate of the assessment order. [Paras 10, 11, 12, 13]

CIT(A)'s orders quashing penalties on the ground of invalid assessments set aside; quashation on that sole ground held unjustified.

Remand for fresh consideration on merits - Whether the matter should be remitted for adjudication on merits. - HELD THAT: - The Tribunal noted that the CIT(A) did not adjudicate the merits of the penalty claims and, having found the CIT(A)'s reasoning flawed, directed that the question of imposition of penalty be remitted to the CIT(A) for fresh consideration. The Tribunal left all aspects open for fresh adjudication and declined the assessee's request to remit the matter to the Assessing Officer, recording that the AO had passed a speaking order on merits and that remand to the first appellate authority was appropriate. [Paras 13, 14]

Penalty issues remitted to the CIT(A) for fresh consideration on merits, with all aspects left open.

Final Conclusion: Appeals by the Revenue allowed for statistical purposes; Tribunal holds penalties under Sections 271D and 271E are independent of assessment annulment and remits the penalty matters to the CIT(A) for fresh consideration on merits.

Classification of goods - anti-dumping duty - confiscation for mis-declaration under customs law - reliance on laboratory test reports in classification - scope and sufficiency of a show cause notice - remand for fresh consideration

Classification of goods - reliance on laboratory test reports in classification - scope and sufficiency of a show cause notice - Whether the Tribunal correctly set aside the demand by holding that the show cause notices contained no basis to disturb the importer's declared classification and that the adjudicating authority had not examined the laboratory report. - HELD THAT: - The Court found the Tribunal's principal findings to be contrary to the contemporaneous record. The show cause notices expressly referred to the IRMRA test reports (dated 06.03.2006) which recorded that the samples were Styrene Butadiene Rubber (SBR) of the 1900 series and indicated applicability of the anti dumping notification. The Commissioner's order noted and relied upon the laboratory reports, and further recorded that the importer had itself obtained IRMRA tests showing styrene content above 60% in the imported samples. The Tribunal's conclusion that there was "no whisper" in the show cause notices to disturb the declared classification, and that the adjudicating authority had not examined the classification based on the laboratory report, ignored these findings on the record. For these reasons the Tribunal's allowance of the appeals on that basis could not be sustained. [Paras 15, 16]

The Tribunal's factual findings that the show cause notices lacked any basis to challenge the declared classification and that the adjudicating authority had not examined the laboratory reports are set aside as contrary to the record.

Remand for fresh consideration - Disposition of the appeals and further course: whether the matter should be remitted for fresh adjudication. - HELD THAT: - Although the Tribunal's decision was set aside for the reasons stated, the Supreme Court did not decide the merits of classification or liability for anti dumping duty. The Court recorded the parties' broad submissions on the merits but left evaluation and final determination to the Tribunal. Consequently, the Court restored the appeals to the Tribunal's file for fresh consideration and determination on merits. [Paras 17]

The Tribunal's order is set aside and the appeals are restored to the Tribunal for fresh adjudication; the merits are to be considered anew by the Tribunal.

Final Conclusion: The appeals are allowed; the CESAT judgment dated 27 September 2017 is set aside. The matters are remitted to the Customs, Excise & Service Tax Appellate Tribunal for fresh determination on merits; no order as to costs.

Refund claim under Section 128 A(3) of the Customs Act, 1962 - identity/description mismatch of goods - re-importation of defective goods - re-examination/verification report - evidentiary value of departmental verification report - remand for re-adjudication

Refund claim under Section 128 A(3) of the Customs Act, 1962 - identity/description mismatch of goods - re-examination/verification report - evidentiary value of departmental verification report - Whether the rejection of the appellant's refund claim on the sole ground of alleged mismatch between the invoice and the bill of entry is sustainable in view of the departmental re-examination/verification report which establishes identity of the re imported goods. - HELD THAT: - The adjudicating authorities had rejected the refund claim on the ground that the description in Invoice No. FACTU 20150005 did not match the description in the invoices/packing lists relating to the re imported goods. The matter was previously remanded for re examination; following re examination the Original Authority again recorded that the goods were found to be as per the invoices and packing lists of the shipping bills and the identity of the goods was established in the presence of the importer's authorised representative. Although the re examination report does not explicitly reproduce the January 2015 invoice, the record shows that the comparisons were made with Invoice No. FACTU 20150005. The Tribunal found that the Original Authority's and Commissioner (Appeals)'s conclusion-that the re examination report did not address the description vis a vis Invoice No. FACTU 20150005-was contradicted by the record. The departmental verification report, prepared after re examination and confirming identity of the goods, was ignored by the authorities below; that report is sufficient to falsify the alleged mismatch which was the sole basis for rejection. On that determinative factual and evidentiary basis the Tribunal set aside the order rejecting the refund and allowed the appeal, holding the appellant entitled to the refund. [Paras 6, 7, 8]

The order rejecting the refund claim on the ground of alleged mismatch is set aside; the appellant is held entitled to the refund and the appeal is allowed.

Final Conclusion: The appeal is allowed: the Tribunal set aside the impugned order rejecting the refund because the departmental re examination/verification report establishes identity of the re imported goods and therefore falsifies the sole ground of alleged mismatch relied upon by the authorities.

Committee of creditors - Financial creditor - Rights and duties of authorised representative - Authorised representative - selection, participation and voting - Verification of claims by the interim resolution professional / resolution professional - Filing of claims by creditors

Filing of claims by creditors - Financial creditor - Appellants who are homebuyers and claim to be financial (unsecured) creditors were directed to file their claims with the Resolution Professional within a specified time-frame. - HELD THAT: - The Tribunal, after hearing parties and referring to the statutory scheme concerning committee of creditors and the role of authorised representatives, directed that the appellants (homebuyers) file their claims before the Resolution Professional/Respondent in accordance with the applicable provisions. The direction was given in view of the fact that the appellants were not parties before the Adjudicating Authority and to enable their claims to be considered under the insolvency process. The Tribunal fixed a period of two weeks from the date of the order for filing such claims to ensure conformity with the timelines envisaged under the Code and regulations. [Paras 9]

Appellants directed to file their claims before the Resolution Professional within two weeks.

Verification of claims by the interim resolution professional / resolution professional - Committee of creditors - Resolution Professional was directed to verify the claims filed by the appellants and forward genuine claims to the Adjudicating Authority. - HELD THAT: - The Tribunal recorded the submission of the Resolution Professional and, relying on the statutory framework governing verification of claims and the functions of the interim resolution professional/resolution professional, directed the respondent to verify the claims submitted by the appellants in accordance with the Code and Regulations. The Tribunal further directed that the genuine claims found to be admissible on verification be forwarded to the Adjudicating Authority for appropriate action, thereby preserving the appellants' ability to participate in the insolvency resolution process through recognised claim adjudication mechanisms. [Paras 10]

Resolution Professional directed to verify the claims and forward genuine claims to the Adjudicating Authority.

Filing of claims by creditors - Verification of claims by the interim resolution professional / resolution professional - The appeal was disposed of with the above directions and no costs were awarded. - HELD THAT: - Having issued the procedural directions to enable the appellants to submit and have their claims verified and processed, the Tribunal concluded the appeal by disposing it in view of the timelines provided under the Code. The order thus functions as a procedural direction to regularise the participation of the appellants in the insolvency process rather than a substantive determination on the merits of individual claims. [Paras 11]

Appeal disposed of in view of the directions given; no order as to costs.

Final Conclusion: The Tribunal directed the homebuyer appellants to file their claims within two weeks, directed the Resolution Professional to verify and forward genuine claims to the Adjudicating Authority, and disposed of the appeal with no order as to costs.

Liquidation under Section 33(3) and Section 33(4) of the Insolvency and Bankruptcy Code, 2016 - Non-implementation of an approved resolution plan as ground for liquidation - Mandatory 330 days time-limit for completion of CIRP under Section 12(3) proviso - Adjudicating Authority functus officio after approval of a resolution plan and limits on recalling approval

Non-implementation of an approved resolution plan as ground for liquidation - Liquidation under Section 33(3) and Section 33(4) of the Insolvency and Bankruptcy Code, 2016 - Mandatory 330 days time-limit for completion of CIRP under Section 12(3) proviso - Whether the Adjudicating Authority ought to have passed an order of liquidation on account of the successful resolution applicant's failure to implement the approved resolution plan after completion of 330 days - HELD THAT: - The Tribunal found that the Resolution Plan approved by the Adjudicating Authority was not implemented by the successful resolution applicant and that 330 days from the insolvency commencement date had elapsed. Applying Sub section (3) and Sub section (4) of Section 33, the Tribunal held that a person other than the corporate debtor may apply for liquidation where the approved plan is contravened, and that upon determination of such contravention the Adjudicating Authority shall pass a liquidation order. The Tribunal further observed the mandatory time limit in the proviso to Section 12(3) requiring completion of CIRP within 330 days and concluded that, given non implementation and expiry of the statutory period, the Adjudicating Authority ought to have passed an order of liquidation. The Tribunal confined its decision to these reliefs and did not adjudicate the question of forfeiture of performance security or other collateral disputes. On that basis the Tribunal set aside the impugned order to the extent it refused liquidation and directed the NCLT to pass a liquidation order in terms of Sections 33(3) and 33(4) and other applicable provisions. [Paras 21, 22, 23, 24, 25]

The Adjudicating Authority's refusal to order liquidation was set aside and the NCLT, Kochi Bench is directed to pass an order of liquidation in MA No.186/KOB/2020 in terms of Section 33(3) and 33(4) of the I&B Code, 2016.

Final Conclusion: Appeal allowed in part: the impugned order dated 10.02.2021 is set aside insofar as it declined to order liquidation; the Adjudicating Authority is directed to pass a liquidation order in terms of Section 33(3) and 33(4) of the I&B Code, 2016. No order as to costs.

Related party - control - nominee director - Articles of Association - qualified majority - Committee of Creditors - interpretation of control under Companies Act vis-a -vis I&B Code - disqualification from CoC to protect CIRP integrity (purposive interpretation)

Related party - nominee director - Articles of Association - qualified majority - control - Committee of Creditors - Whether the Appellant (TSTPC) is a 'related party' of the Corporate Debtor and therefore disqualified from membership/voting in the Committee of Creditors - HELD THAT: - The Tribunal examined the Articles of Association, the presence of nominee directors, the role of the Appellant's Managing Director on the Corporate Debtor's board, the manner in which key decisions require a qualified majority including at least one director nominated by the Appellant (Article 62), and the fact that transactions were disclosed as related party transactions in statutory records. Applying a purposive interpretation of the Code (informed by the Supreme Court's reasoning in Phoenix and Arcelor Mittal), the Tribunal held that 'control' in the context of related-party exclusion connotes de facto influence over management or policy decisions and not merely a nominal right to block resolutions. The combined effect of the Articles, the practical role of the nominee directors (including advisory and double-role functioning), and the reporting of the relationship in audited statements demonstrated significant influence. The Tribunal concluded that these factors, taken cumulatively, establish that the Appellant falls within the definition of a related party under section 5(24) of the I&B Code, and that the Adjudicating Authority was correct in directing the Resolution Professional to reconstitute the CoC treating the Appellant as a related party. The Tribunal noted that the purpose of the proviso to section 21(2) is to prevent related parties from subverting the CIRP and that only those who are not related parties in praesenti should participate in the CoC; where a present relationship of significant influence exists, exclusion is warranted. [Paras 61, 67, 68, 69, 71]

The Appellant is a related party; the Adjudicating Authority's direction to reconstitute the CoC excluding the Appellant from creditor representation/voting is upheld.

Final Conclusion: The appeal is dismissed; the Adjudicating Authority's finding that the Appellant is a related party and its direction to the Resolution Professional to reconstitute the Committee of Creditors accordingly are upheld. All connected interlocutory applications are closed.

Inquiry under Section 340 Cr.P.C. in proceedings where document did not form basis of adjudication - Requirement that adjudication be based on an allegedly fabricated document before invoking prosecution under Section 340 Cr.P.C. - Extension of limitation by Supreme Court's suo motu order does not enlarge the statutory period for condonation under Section 61 proviso of the IBC - Applicability of Section 61 IBC limitation and the Tribunal's limited condonation power under the proviso

Extension of limitation by Supreme Court's suo motu order does not enlarge the statutory period for condonation under Section 61 proviso of the IBC - Applicability of Section 61 IBC limitation and the Tribunal's limited condonation power under the proviso - Whether the appeal was barred by limitation and whether the delay ought to be condoned - HELD THAT: - The impugned order was pronounced on 03.02.2020, and under Section 61 of the IBC the appeal period expired on 04.03.2020. The appeal was filed on 29.12.2020, resulting in a delay of 299 days. The Appellant relied on the Supreme Court's Suo Motu order extending limitation; however, the Tribunal followed the clarification in Sagufa Ahmed that the Suo Motu order extended only the period of limitation and did not extend the period up to which delay may be condoned under a statutory discretion. The Suo Motu extension applied only where limitation expired on or after 15.03.2020; it did not cover cases in which the limitation period had already expired prior to that date. Consequently, the proviso to Section 61 permitting condonation for not more than 15 days could not cure the extensive delay in filing the appeal. [Paras 12, 13]

Application for condonation of delay dismissed and the appeal held to be barred by limitation

Inquiry under Section 340 Cr.P.C. in proceedings where document did not form basis of adjudication - Requirement that adjudication be based on an allegedly fabricated document before invoking prosecution under Section 340 Cr.P.C. - Whether the Adjudicating Authority erred in dismissing the Section 340 Cr.P.C. application alleging that the MOU was forged - HELD THAT: - The Adjudicating Authority found that the alleged MOU did not form the basis of its adjudication in the earlier proceedings. Section 340 Cr.P.C. and the contingent reference in Section 195(1)(b) require that a court's decision be based on a fabricated or forged document for an inquiry/prosecution to be expedient in the interests of justice. Since the MOU neither formed the basis of the Adjudicating Authority's decision nor was relied upon in admitting the subsequent Section 7 petition, the threshold for initiating an inquiry under Section 340 was not satisfied. The Tribunal found no flaw in that determination and upheld the Adjudicating Authority's exercise of discretion in refusing to order an inquiry. [Paras 3, 6, 14]

Application under Section 340 Cr.P.C. rightly dismissed; impugned order upheld on merits

Final Conclusion: The appeal is dismissed both as barred by limitation and on merits; application for condonation of delay dismissed; no order as to costs.

Reasonableness of fee - Success fee not part of insolvency resolution process costs - Justiciability of fees approved by the Committee of Creditors - Commercial wisdom of the Committee of Creditors - Regulation 34 permitting the Committee to fix expenses subject to reasonableness - Disclosure and transparency obligations of the Resolution Professional - IBBI Circular No. IBBI/IP/013/2018 as guidance on reasonable fees and costs

Success fee not part of insolvency resolution process costs - IBBI Circular No. IBBI/IP/013/2018 as guidance on reasonable fees and costs - Reasonableness of fee - Whether a 'success fee' claimed by the Resolution Professional is chargeable as part of insolvency resolution process costs under the Code and Regulations. - HELD THAT: - The Tribunal held that a success fee which is contingent/ speculative in nature is not provided for under the Code or the Regulations and is not chargeable as IRPC. The IBBI Circular dated 12.06.2018 (No. IBBI/IP/013/2018) and its Annexures only guide on what constitutes a reasonable fee and costs; Annexure-B reproduces illustrative best practices and cannot be read as creating a right to success fees. The Code and Regulations require that fees be reasonable, directly related to and necessary for the CIRP, determined at arm's length, and disclosed; a success fee squeezed in at the last stage is more in the nature of a gift or reward and is contrary to the non result oriented, dispassionate role expected of a Resolution Professional. Even if a success fee were to be regarded as chargeable, the manner and timing of its imposition in the present case (a last minute inclusion at approval stage) and the quantum approved were improper and incorrect. [Paras 32, 33, 38]

A success fee of the character claimed is not chargeable as IRPC; in any event, the last minute inclusion and the quantum in the present case are improper and not sustainable.

Justiciability of fees approved by the Committee of Creditors - Commercial wisdom of the Committee of Creditors - Regulation 34 permitting the Committee to fix expenses subject to reasonableness - Disclosure and transparency obligations of the Resolution Professional - Whether the Adjudicating Authority may interfere with or examine the reasonableness of fees (including fees approved by the CoC) and whether the tribunal was justified in directing distribution of the amount earmarked as success fee. - HELD THAT: - The Tribunal held that although Regulation 34 permits the Committee to fix expenses to be incurred on or by the Resolution Professional, such fixation is subject to the Code and Regulations which require fees to be reasonable, transparent, disclosed and supported by contemporaneous records. The decision on the quantum and manner of fee payment is therefore justiciable and amenable to scrutiny by the Adjudicating Authority where the fee is unreasonable or the method of payment is inconsistent with the regulatory framework. The Adjudicating Authority did not impermissibly intrude into the commercial wisdom of the CoC by disallowing the success fee; instead it exercised scrutiny to protect other stakeholders, directing proportionate distribution of the amount so set aside, a relief that would in effect have benefited the creditors and homebuyers. The Tribunal rejected the submission that the proper course was to remit the plan back to the CoC, holding that the direction for distribution was an appropriate remedy. [Paras 26, 31, 38, 39, 40]

The Adjudicating Authority was entitled to examine the reasonableness of the fee approved by the CoC and to direct proportionate distribution of the amount earmarked as success fee; this did not unlawfully intrude upon the CoC's commercial wisdom.

Final Conclusion: The appeal is dismissed. A contingent 'success fee' of the kind claimed by the Resolution Professional is not chargeable as IRPC; in any event, its last minute inclusion and the quantum were improper. The Adjudicating Authority rightly scrutinised the fee approved by the CoC and directed proportionate distribution of the amount for the benefit of creditors; no interference with that conclusion is warranted.

Withdrawal of CoC approved resolution plan - residuary jurisdiction under Section 60(5)(c) of the IBC - resolution plan binding and irrevocable - finality and predictability of CIRP timelines - rule of casus omissus in statutory interpretation - inadmissibility of judicially creating withdrawal rights contrary to statute

Withdrawal of CoC approved resolution plan - resolution plan binding and irrevocable - finality and predictability of CIRP timelines - Whether a successful Resolution Applicant can withdraw a Resolution Plan after the plan has been approved by the Committee of Creditors and submitted to the Adjudicating Authority - HELD THAT: - The Tribunal applied the ratio and reasoning of the Hon'ble Supreme Court in Ebix Singapore (and related precedents) holding that the IBC and CIRP Regulations provide a tightly regulated, timeline driven process that does not contemplate an exit route for a successful Resolution Applicant once the CoC has approved the plan and it has been submitted under Section 30/31. The absence of a statutory provision allowing such withdrawal was treated as an omission that cannot be supplied by judicial construction (rule of casus omissus). The court emphasised the primacy of creditors' interests, the need for predictability and timeliness in CIRP, and the binding/irrevocable nature of a submitted resolution plan as between the CoC and the successful Resolution Applicant. Consequently, the Tribunal concluded that withdrawal post CoC approval is impermissible and the SRA's attempt to withdraw was untenable. [Paras 26, 27]

A CoC approved resolution plan, once submitted, cannot be withdrawn by the successful Resolution Applicant; the appeal against the Adjudicating Authority's permitting withdrawal is dismissed in part and the law laid down in Ebix Singapore is followed.

Residuary jurisdiction under Section 60(5)(c) of the IBC - inadmissibility of judicially creating withdrawal rights contrary to statute - Whether the Adjudicating Authority had jurisdiction to permit withdrawal of a CoC approved Resolution Plan by invoking its residuary powers under Section 60(5)(c) - HELD THAT: - The Tribunal held that the Adjudicating Authority erred in invoking residuary powers under Section 60(5)(c) to permit withdrawal. Reliance on residual or inherent powers to grant reliefs not envisaged by the statute would undermine the IBC's objectives of speed and predictability. The Tribunal followed the Supreme Court's analysis that courts/tribunals must not, by interpretation, confer on the Adjudicating Authority powers to allow unilateral withdrawal or renegotiation by a successful Resolution Applicant where the legislative scheme omits such a remedy. [Paras 12, 26]

The Adjudicating Authority had no jurisdiction under Section 60(5)(c) to permit withdrawal of a CoC approved resolution plan; the impugned reliance on residuary powers was quashed.

Rule of casus omissus in statutory interpretation - finality and predictability of CIRP timelines - Whether delay, alleged deterioration of the corporate debtor's business, or alleged misstatements in the Information Memorandum justified permitting withdrawal of the approved resolution plan - HELD THAT: - Applying the Supreme Court's reasoning in Ebix Singapore and related authorities, the Tribunal held that alleged delay or change of circumstances, including the effects of the pandemic, do not furnish a basis for judicially creating a right of withdrawal for a successful Resolution Applicant. The Resolution Applicant is deemed to have conducted due diligence and taken the statutory regime and timelines into account before submitting the plan; opportunistic post hoc complaints do not override statutory finality. Consequently the grounds of delay, alleged mis statement or deterioration were insufficient to permit withdrawal. [Paras 24, 25, 26]

Allegations of delay, business deterioration or misstatements did not justify permitting withdrawal of the CoC approved plan; such grounds were found untenable.

Remittal for consideration under Section 30/31 - Whether the matters should be remitted to the Adjudicating Authority for decision on the Resolution Plan under Section 30/31 - HELD THAT: - Although the Adjudicating Authority's order permitting withdrawal was quashed, the Tribunal did not decide the merits of the Resolution Plan under Section 31. Instead, following the setting aside of the withdrawal order and in the interest of concluding the CIRP within the statutory framework, the Tribunal remitted IA No. 476/2018 to the Adjudicating Authority with a clear direction to consider the Resolution Professional's application under Section 30/31 urgently and decide it within one month. Ancillary directions were given to keep the performance bank guarantee alive pending that decision. [Paras 29]

The matter is remitted to the Adjudicating Authority to decide IA No. 476/2018 under Section 30/31 within one month; performance bank guarantee to be kept alive until that decision.

Final Conclusion: The appeals by the CoC and Resolution Professional are allowed and the Adjudicating Authority's order permitting withdrawal of the CoC approved resolution plan is quashed; the Successful Resolution Applicant's appeal is dismissed. The matter is remitted for expeditious decision on the Resolution Professional's application under Section 30/31 within one month, and the performance bank guarantee is to be kept alive until that decision.

Manpower recruitment and supply service - deputation of employees - agency-client relationship - commercial concern - control and supervision - reimbursement of actual cost - res integra

Manpower recruitment and supply service - deputation of employees - agency-client relationship - commercial concern - control and supervision - reimbursement of actual cost - Whether deputation of the assessee's employees to its group companies amounted to taxable Manpower Recruitment & Supply Service. - HELD THAT: - The Tribunal found that the assessee deputed employees to group companies for business contingencies while retaining continuous control and supervision over those employees; payments were made by debit notes or book adjustments and no invoices were raised or service tax collected. On the basis of facts that the company was not in the business of providing recruitment or supply of manpower, that reimbursements reflected actual costs without profit or financial benefit, and that there was no agency-client relationship, the activity did not fall within the ambit of a commercial concern providing manpower recruitment or supply to a client. The Tribunal relied on the reasoning of the High Court of Gujarat in CST v. Arvind Mills Ltd., which held that similar deputation arrangements are not covered by the definition of Manpower Recruitment Supply Agency where the sender retains control and only recovers actual costs. The Bench also noted consistent departmental precedent in its own earlier decisions in favour of the appellant. Applying these principles, the Tribunal concluded the issue is no longer res integra and must be decided for the appellant.

The deputation of employees to group companies did not constitute taxable Manpower Recruitment & Supply Service; the impugned order is set aside and the appeal allowed.

Final Conclusion: The appeal is allowed; the impugned order upholding the demand and penalties is set aside and consequential relief, if any, shall follow as per law.

Refund of CENVAT credit under Rule 5 - Proportional refund formula - No requirement of nexus between input services and exported services for refund under amended Rule 5 - Availability of CENVAT credit to be examined under Rule 14 - Remand for verification of documents

Refund of CENVAT credit under Rule 5 - No requirement of nexus between input services and exported services for refund under amended Rule 5 - Proportional refund formula - Whether the Commissioner (Appeals) correctly denied/refused portion of the refund by holding that certain services did not qualify as input services for the purpose of refund under amended Rule 5 of the CENVAT Credit Rules, 2004 - HELD THAT: - The Tribunal held that the substituted Rule 5 prescribes a formula for refund based on the ratio of export turnover to total turnover and does not require establishment of a nexus between input services and exported services. The amended rule permits refund of accumulated CENVAT credit proportionately and the admissibility of the quantum of credit cannot be re-opened in refund proceedings under Rule 5. Any challenge to the availability of CENVAT credit should be undertaken through proceedings under Rule 14. Reliance was placed on earlier tribunal decisions and the TRU clarification to the effect that the new scheme dispenses with the correlation requirement and that revenue cannot, at refund stage, examine availability of credit that was not objected to at the time of availing credit. Applying this principle, the findings of Commissioner (Appeals) which held specific services inadmissible for the purpose of computing refund were unsustainable in the refund proceedings under Rule 5. [Paras 4]

The impugned disallowance of credits for computing refund under Rule 5 cannot be sustained; the entire credit as claimed is to be treated as admissible for determining the refund unless disallowed in proper Rule 14 proceedings.

Remand for verification of documents - Availability of CENVAT credit to be examined under Rule 14 - Whether the matter should be remitted to the original authority for verification of documents and disposal of the refund claim - HELD THAT: - Although the Tribunal held that the permissibility of denying credit could not be adjudicated in Rule 5 refund proceedings, it directed remand to the original authority for verification of the subject documents relied upon by the appellant. The Tribunal modified the Commissioner (Appeals) order to the extent that the appellant's claimed credit shall be treated as admissible for computing refund unless and until it is held otherwise in appropriate proceedings under Rule 14. The original authority was directed to verify documents and dispose of the refund claim within three months after affording hearing. [Paras 4, 5]

Appeal allowed insofar as computing refund using the credit claimed; matter remanded to the original authority for document verification and disposal within three months.

Final Conclusion: The Tribunal allowed the appeal in part, holding that amended Rule 5 permits refund computation without requiring nexus between input services and exports and that admissibility of CENVAT credit cannot be examined in refund proceedings; the claimed credit is to be treated as admissible for refund computation unless negatived in separate Rule 14 proceedings, and the matter is remanded to the original authority for verification of documents and disposal within three months.

Liability to service tax for restaurant service - sale versus service - dominant aspect test - service tax on food supplied in hotel room - exclusion of sale of goods from 'service' under Clause (44) of Section 65B of the Finance Act, 1994 - Board Circular No. 139/8/2011-TRU dated 10.05.2011

Service tax on food supplied in hotel room - sale versus service - dominant aspect test - Board Circular No. 139/8/2011-TRU dated 10.05.2011 - Whether food served to hotel guests in their rooms is liable to service tax as 'restaurant service'. - HELD THAT: - The Tribunal found as an admitted fact that the appellant raised separate bills for food supplied to room guests and charged VAT on the value of food, treating the transaction as a sale of goods. Applying the dominant-aspect test, the Tribunal held that the predominant character of the transaction was sale of food and not a service. The Board Circular dated 10.05.2011 was held to be squarely applicable in clarifying that food served in a hotel room is not liable to service tax as a 'restaurant service'. The Tribunal distinguished delivery of food from the hotel kitchen to a guest's room from restaurant service, observing that restaurant service involves additional service elements (such as ambience and attendant service) which are absent when food is sold and delivered to a room. In view of these findings and the Board's clarification, the demand confirmed by the Commissioner (Appeals) was set aside and the order of the Assistant Commissioner dropping the demand was restored. [Paras 7, 9]

Appeal allowed; demand of service tax set aside and original order restored, with consequential benefits to the appellant.

Final Conclusion: The Tribunal held that food supplied to hotel guests in their rooms is a sale of goods (VATable) and not chargeable to service tax as 'restaurant service' in view of the dominant-aspect test and the Board Circular dated 10.05.2011; the departmental demand was quashed and the original order restoring no-demand was reinstated.

Admissibility of Cenvat credit - input service - service recipient - benefit to members of an association - allocation of credit among co beneficiaries - reverse charge mechanism

Admissibility of Cenvat credit - input service - Legal consultancy service engaged for the litigation was an admissible input service and Cenvat credit for that service can be availed. - HELD THAT: - The Tribunal found that the legal service related to a case which concerned the manufacture of the appellant's final product and that legal services are included within the definition of input service. On that basis the service qualifies as an admissible input service and Cenvat credit can be allowed. This conclusion follows the Tribunal's acceptance that the legal service was directly connected to matters concerning manufacture and is covered by the inclusion clause of the definition of input service. [Paras 4]

Legal consultancy service held admissible as an input service and Cenvat credit is in principle allowable.

Service recipient - benefit to members of an association - allocation of credit among co beneficiaries - reverse charge mechanism - Whether the appellant was entitled to the full Cenvat credit where the litigation was instituted by an association of which the appellant was one member. - HELD THAT: - The Tribunal observed that the writ was filed in the name of the Distiller's Association of Maharashtra for the collective benefit of its members; consequently the service benefitted all members and not exclusively the appellant. Although the invoice was raised to the appellant and payment was made by it, that fact alone did not entitle the appellant to the entire credit. The Tribunal held that the appellant was prima facie entitled only to the portion of the credit attributable to services used for the appellant's benefit and that the extent of entitlement must be quantified. [Paras 4]

Credit allowable only to the extent attributable to the appellant; entitlement and quantum to be reworked and verified.

Final Conclusion: Impugned order set aside and the matter remanded to the adjudicating authority to rework and determine the portion of Cenvat credit admissible to the appellant in respect of the legal consultancy service and pass a fresh order in accordance with the Tribunal's observations.

Prohibition on utilisation of Cenvat credit under pre-amendment Rule 8(3A) - Conflict between Rule 8(3) (interest for late payment) and Rule 8(3A) (denial of credit and deeming of non-payment) - Substitution of Rule 8(3A) with retrospective effect - Quashing of pre-amendment Rule 8(3A) by judicial pronouncements - Penal consequences under Rule 25 not attracted where invoice and books record the transaction

Prohibition on utilisation of Cenvat credit under pre-amendment Rule 8(3A) - Conflict between Rule 8(3) (interest for late payment) and Rule 8(3A) (denial of credit and deeming of non-payment) - Substitution of Rule 8(3A) with retrospective effect - Whether the appellant was liable to pay excise duty again in cash for goods cleared on 06.08.2013 and 07.08.2013 by utilising Cenvat credit because of default in payment for June, 2013 under pre-amendment Rule 8(3A). - HELD THAT: - The Tribunal found an intra statutory conflict between Rule 8(3), which prescribes interest for late payment of duty, and the pre amendment Rule 8(3A), which denied utilisation of Cenvat credit and deemed clearances as without payment where default continued beyond thirty days. Subsequent judicial quashal of the pre amendment Rule 8(3A) and the executive substitution of Rule 8(3A) by a provision prescribing a penal interest of 1% per month removed the legal basis for treating clearances as unpaid and for disallowing Cenvat credit. Applying rules of statutory interpretation, the substituted provision was held to have retrospective effect unless expressly made prospective, thereby retroactively eliminating the restriction that formed the basis of the show cause notice. On that basis the Tribunal concluded that the demand for recovery of duty in cash on account of the pre amendment Rule 8(3A) could not be sustained. [Paras 17, 18, 19]

Demand for payment of duty in cash on account of use of Cenvat credit for clearances dated 06.08.2013 and 07.08.2013 is unsustainable and set aside.

Penal consequences under Rule 25 not attracted where invoice and books record the transaction - Whether penalty under Rule 25 of the Central Excise Rules, 2002 was correctly imposed on the appellant for the same clearances. - HELD THAT: - The Tribunal noted that invoices were issued for the clearances and the transactions were recorded in the books of account. In view of the removal of the legal foundation for deeming the clearances as without payment and because the formal commercial documentation existed, the conditions for invoking Rule 25 were not satisfied. The Tribunal therefore held that Rule 25 could not be applied to impose the penalty sought in the impugned order. [Paras 19]

Penalty under Rule 25 is not attracted and the penalty imposed is set aside.

Final Conclusion: The appeal is allowed; the impugned demand and penalty are set aside and the appellant is entitled to consequential benefits in accordance with law.

Admissibility of Cenvat credit on the basis of supplementary invoices - scope and applicability of Rule 9(1)(b) of the Cenvat Credit Rules, 2004 - precedent and recurring-issue principle

Admissibility of Cenvat credit on the basis of supplementary invoices - scope and applicability of Rule 9(1)(b) of the Cenvat Credit Rules, 2004 - precedent and recurring-issue principle - Whether the appellant was entitled to avail Cenvat credit on the basis of supplementary invoices issued by coal companies and whether Rule 9(1)(b) CCR operates to deny such credit in the facts of the case. - HELD THAT: - The Tribunal examined the appellant's claim for Cenvat credit taken on supplementary invoices issued by subsidiaries of Coal India Ltd. and considered the departmental objection founded on Rule 9(1)(b) of the Cenvat Credit Rules, 2004. It noted that the precise controversy has been the subject of earlier Tribunal decisions, which have repeatedly held in favour of allowing credit on such supplementary invoices and have considered the applicability of Rule 9(1)(b). Relying on those precedents and treating the question as a recurring issue no longer res integra, the Tribunal found that the prior decisions squarely covered the point and that there was no element of fraud or suppression warranting denial. Consequently, the view that Rule 9(1)(b) should operate to disallow the credit in these circumstances was rejected to the extent inconsistent with those precedents, and the earlier orders denying credit were set aside.

Order confirming recovery of Cenvat credit was set aside and the appeal allowed; appellant entitled to take Cenvat credit on the supplementary invoices in question.

Final Conclusion: The Tribunal allowed the appeal, set aside the impugned orders and held that, on the facts and in view of binding precedents treating the issue as settled, the appellant was entitled to avail Cenvat credit on the supplementary invoices; the departmental reliance on Rule 9(1)(b) did not sustain denial of credit in these circumstances.

Violation of principles of natural justice - opportunity to be heard / audi alteram partem - reassessment order quashed - remand for fresh reconsideration - delay and laches - availability of alternative remedy

Violation of principles of natural justice - opportunity to be heard / audi alteram partem - reassessment order quashed - remand for fresh reconsideration - Impugned reassessment order dated 29.03.2016 and subsequent endorsement dated 12.04.2021 were passed without providing the petitioner an opportunity to be heard and are therefore liable to be quashed and remitted. - HELD THAT: - The Court found that the impugned order records that a notice was returned unserved with the endorsement "no such premises found" yet the same order proceeds to note that the officer visited the premises and obtained documents from other sources. There is no indication that the petitioner was informed of the proceedings or afforded any opportunity, reasonable or otherwise, to be heard before the order was passed. Such omission amounts to a breach of the principles of natural justice. In view of this procedural infirmity the impugned order and the subsequent endorsement cannot stand and the matter must be sent back for fresh consideration after affording the petitioner sufficient opportunity to be heard. [Paras 3, 7, 9]

Impugned order dated 29.03.2016 and endorsement dated 12.04.2021 quashed; matter remitted for fresh consideration with direction to afford sufficient opportunity to the petitioner.

Delay and laches - availability of alternative remedy - Contentions of respondents that the petition is barred by delay and laches or is not maintainable due to availability of alternative remedies were rejected. - HELD THAT: - The Court declined to accept the respondents' objections based on delay, laches and existence of alternative efficacious remedies because the petitioner was not aware of the reassessment proceedings or the impugned order until receipt of communication from the Judicial Magistrate initiating recovery proceedings. Given the finding of violation of natural justice and the petitioner's lack of knowledge of the impugned order until recovery action, the preliminary objections regarding maintainability and delay were held to be untenable. [Paras 6, 8]

Objections based on delay, laches and availability of alternative remedy not accepted; writ petition held maintainable on the stated grounds.

Final Conclusion: Writ petition allowed; impugned reassessment order dated 29.3.2016 and endorsement dated 12.4.2021 quashed and matter remitted to respondent No.2 for fresh disposal in accordance with law after affording the petitioner sufficient opportunity to be heard; respondent directed to conclude proceedings expeditiously.

Departmental Management fee credit - Adjustment of amounts collected during departmental management - Retrospective operation of delegated legislation - Forfeiture versus credit of departmental management fee - Amnesty scheme relief and compromise discharge - Cancellation of licence and recovery of actual loss - Lex prospicit non respicit (principle against retrospectivity)

Departmental Management fee credit - Adjustment of amounts collected during departmental management - Forfeiture versus credit of departmental management fee - Retrospective operation of delegated legislation - Lex prospicit non respicit (principle against retrospectivity) - Whether the amended Rule 13 (effective 23-12-1993) applied to contracts and licences entered into before its amendment and therefore precluded crediting amounts collected as departmental management fee against the dues of the original licensee. - HELD THAT: - The Court held that the amended Rule 13, which declared departmental management fee liable to forfeiture, did not operate retrospectively to contracts entered into prior to 23-12-1993. The Division Bench decision in Lucka v State of Kerala was treated as correctly stating the law that where a rule purports to alter accrued rights or liabilities created under an earlier rule, retrospective operation will not be presumed in the absence of a clear legislative intention. The Court applied the established principle that delegated legislation cannot be given retrospective effect unless expressly or by necessary implication authorized; this precept, reinforced by cited authorities, requires that amounts actually collected by the State while it managed the vend (departmental management fee and excise duty for the period the State was in charge) be given credit when computing the actual loss recoverable from the defaulting licensee. Consequently, the State could not recover those sums again from the licensee for the period 13-09-1993 to 31-03-1994 merely by relying on the amendment brought into force on 23-12-1993. [Paras 14, 15, 16, 17, 20]

Amended Rule 13 is inapplicable retrospectively to contracts entered before 23-12-1993; amounts collected by the State under departmental management for the period the vend was under its control must be adjusted against the licensee's liability and cannot be recovered again.

Amnesty scheme relief and compromise discharge - Closure on payment and release of attachment - Cancellation of licence and recovery of actual loss - Whether the respondent/licensee was entitled to relief under the State's amnesty schemes and, on what terms, the outstanding liability for the cancelled 1993-94 licence should be treated as finally discharged. - HELD THAT: - The Court observed that the respondent had sought relief under the 2008 amnesty scheme which the State declined to process on the ground that departmental management fees were not adjustable; the Court found that refusal inconsistent with the principle that pre-amendment contracts remained entitled to credit of amounts collected during departmental management. Considering that the respondent had already deposited 50% of the admitted amount pursuant to a subsequent amnesty scheme and interim orders, and having regard to the overall circumstances and final adjudication on adjustability, the Court directed that the respondent be permitted to deposit the remaining admitted amount within two months. Upon such payment the respondent's liabilities in respect of the cancelled contract for the 1993-94 period would stand discharged; the State was directed to release attached property and refrain from further recovery proceedings for that period, and no interest was to be charged on the principal amount so admitted. [Paras 18, 19, 21, 22, 23]

Respondent entitled to relief under the amnesty framework as directed: balance payment to be made within two months; upon payment the liability for the cancelled 1993-94 licence stands discharged, attached property to be released, and no interest to be charged.

Final Conclusion: The High Court judgment is upheld. The amended Rule 13 does not apply retrospectively to contracts entered into before 23-12-1993 and amounts collected by the State during departmental management must be adjusted against the licensee's liability; the respondent is permitted to pay the balance of the admitted amount within two months, upon which the arrears for the cancelled 1993-94 licence shall stand discharged, attached property released, no interest shall be payable, and the appeal is dismissed in terms of the directions given.