TaxTMI Updates e-Newsletter
Sep 27,2019

Apportionment of input tax credit on capital goods - useful life of capital goods calculated from date of invoice - computation and reversal of balance credit under the proviso to rule 43(1)(d) and rules 43(1)(e),(f),(g) - apportionment of common input tax credit on input services - determination of common credit attributable to exempt supplies under rule 42 and final adjustment under rule 42(2)

Apportionment of input tax credit on capital goods - useful life of capital goods calculated from date of invoice - proviso to rule 43(1)(d) - Extent and manner of admissible input tax credit on capital goods initially used for taxable supplies and subsequently used for both taxable and exempt supplies. - HELD THAT: - The Authority accepted the Revenue's construction of rule 43 and held that input tax attributable to each capital good must be credited to the electronic credit ledger and apportioned over the useful life prescribed in rule 43, which is sixty months from the date of invoice. Where capital goods were used for producing taxable goods and thereafter for both taxable and exempt goods, the proviso to rule 43(1)(d) prescribes the portion attributable to the period when the goods were used exclusively for taxable supplies; the remaining credit forms part of the corpus Tc and must be apportioned over the balance of the useful life in accordance with rules 43(1)(e), (f) and (g). The Applicant is therefore required to compute the admissible amounts in the tax periods over the useful life calculated from the invoice date and reverse the balance amount already credited to the electronic credit ledger. [Paras 4]

Input tax credit on such capital goods must be computed from the date of invoice over the prescribed useful life under rule 43; the portion attributable to taxable-only use is to be determined under the proviso to rule 43(1)(d) and the balance apportioned under rules 43(1)(e)-(g), with reversal of any balance credited.

Apportionment of common input tax credit on input services - determination of common credit attributable to exempt supplies under rule 42 - final adjustment under rule 42(2) - Admissibility of input tax credit on input services for the tax periods prior to commencement of exempt supplies. - HELD THAT: - The Authority applied the formula and mechanism in rule 42 for determining common credit attributable to exempt supplies (D1 = (E/F)*C2) and observed that where commercial production of exempt goods had not commenced in 2018-19, the aggregate value of exempt supplies (E) for those tax periods is zero. Consequently, the amount of common credit attributable to exempt supplies for 2018-19 is nil. Subject to the procedural and final adjustment requirements of rule 42(2), the entire input tax on input services for 2018-19 is therefore admissible as credit. [Paras 4]

Entire input tax on input services is admissible as credit for 2018-19, subject to compliance with rule 42(2), because no exempt supplies were made in that period.

Final Conclusion: The Authority ruled that (i) input tax credit on capital goods used first for taxable supplies and later for both taxable and exempt supplies must be computed from the invoice date over the useful life under rule 43, applying the proviso to rule 43(1)(d) and rules 43(1)(e)-(g), with reversal of the balance credited; and (ii) since exempt production did not commence in 2018-19, the entire input tax on input services for 2018-19 is admissible subject to rule 42(2).

Exemption under Sl. No. 3 of Notification No. 9/2017 (Integrated Tax) (Rate) - in relation to any function entrusted to a Panchayat or a Municipality under Articles 243G or 243W of the Constitution - scope of functions in the Eleventh and Twelfth Schedules - advance ruling admissibility under section 97(2)(b) of the GST Act read with section 20(xviii) of the IGST Act - pure service (no supply of goods) - supply to State Government eligible for exemption

Pure service (no supply of goods) - exemption under Sl. No. 3 of Notification No. 9/2017 (Integrated Tax) (Rate) - Eleventh Schedule - minor irrigation, water management and watershed development - Whether the Applicant's services as Financial Management Specialist to the Government of Tamilnadu are eligible for exemption under Sl. No. 3 of the Exemption Notification. - HELD THAT: - The Authority examined the contracts and scope of work and found the Applicant engaged as a consultant to support the Project Management Unit in implementing the 'Climate Adaptation in Vennar Sub-basin in Cauvery Delta' project, including setting up and managing project accounts and related financial management tasks. The services do not involve supply of goods and are therefore 'pure services'. The project aims at improving water management, flood risk management and upgradation of irrigation infrastructure which fall within Entry 3 of the Eleventh Schedule (minor irrigation, water management and watershed development). Applying the principle that exemption under Sl. No. 3 applies where the service supplied is an activity relatable to a function entrusted to a Panchayat or Municipality under Articles 243G/243W, the Authority concluded that the Applicant's consultancy services are in relation to a function listed in the Eleventh Schedule and thus eligible for exemption under Sl. No. 3, subject to the conditions of the Notification and that the supply is not a composite supply involving goods. [Paras 3]

The Applicant's services to the Government of Tamilnadu are eligible for exemption under Sl. No. 3 of Notification No. 9/2017 (Integrated Tax) (Rate).

Pure service (no supply of goods) - exemption under Sl. No. 3 of Notification No. 9/2017 (Integrated Tax) (Rate) - Twelfth Schedule - roads and bridges - application of Articles 243G/243W and Art 243M(2) in relation to Mizoram - Whether the Applicant's services as Institutional Development Specialist to the Government of Mizoram are eligible for exemption under Sl. No. 3 of the Exemption Notification. - HELD THAT: - The Authority reviewed the Applicant's contractual scope which requires assisting the Public Works Department in developing and implementing the Road Sector Modernization Plan, reviewing progress, developing road sector strategy and establishing management cells for roads and bridges. These are consulting services without supply of goods and thus 'pure services'. Although Article 243M(2) excludes the Part on Panchayats (including Article 243G) from applying to Mizoram, the Authority noted that Entry 4 of the Twelfth Schedule and Entry 4 of the Mizoram Municipalities Act, 2007 include roads and bridges as municipal functions. The services supplied are therefore activities relatable to a function entrusted to a Municipality under Article 243W. Applying the established approach that exemption under Sl. No. 3 depends on whether the service is relatable to a function in the Eleventh/Twelfth Schedule (or as entrusted by state enactment) and not on the identity of the supplier, the Authority held that the Applicant's services to the Government of Mizoram fall within the exemption, provided the supply is not a composite supply involving goods. [Paras 3]

The Applicant's services to the Government of Mizoram are eligible for exemption under Sl. No. 3 of Notification No. 9/2017 (Integrated Tax) (Rate).

Final Conclusion: The Authority ruled that the Applicant is providing pure services to the State Governments in relation to projects involving functions entrusted to a Panchayat or a Municipality under Articles 243G or 243W, and that those services to the Governments of Tamilnadu and Mizoram are eligible for exemption under Sl. No. 3 of Notification No. 9/2017 (Integrated Tax) (Rate), subject to the provisions of the Notification and relevant GST Act provisions.

Service of notice - Furnishing copy of statutory notice - Form GST MOV 10 - Personal attendance before authority pursuant to notice

Service of notice - Furnishing copy of statutory notice - Form GST MOV 10 - Whether the notice in Form GST MOV 10 issued under section 130 of the Central Goods and Services Tax Act, 2017 has been served on the petitioner and whether a copy should be furnished to the petitioner's advocate. - HELD THAT: - The Assistant Government Pleader stated that the notice in Form GST MOV 10 had been issued and served on the petitioner (para 1). The petitioner's counsel disputed service, asserting that although the petitioner's signatures were obtained on various documents, a copy of the MOV 10 notice had not been furnished to him (para 2). In view of this dispute, the High Court directed the Assistant Government Pleader to ensure that a copy of the notice issued in Form GST MOV 10 be duly furnished to the petitioner's counsel forthwith on the same day (para 3). The Court further recorded the contents of the notice requiring the petitioner's presence before the respondent authority on 25.09.2019 and directed that the petitioner may accordingly appear and make submissions (para 3.1). The matter was adjourned and stood over to 26th September 2019 (para 4). [Paras 1, 2, 3, 4]

The respondent is directed to furnish a copy of the Form GST MOV 10 notice to the petitioner's counsel forthwith; the petitioner is permitted to appear before the concerned authority on 25.09.2019 and make submissions; the matter stands over to 26th September 2019.

Final Conclusion: Interlocutory direction: supply of the Form GST MOV 10 notice to the petitioner's counsel was ordered forthwith, the petitioner was permitted to appear before the authority on the specified date, and the matter was adjourned to 26 September 2019.

Release of detained goods on payment of differential tax and penalty under the GST detention provisions - interim release subject to payment of differential amount between amount paid by assessee and amount computed by revenue - waiver of service of notice and permission for direct service

Release of detained goods on payment of differential tax and penalty under the GST detention provisions - interim release subject to payment of differential amount between amount paid by assessee and amount computed by revenue - Direction for interim release of the detained truck and goods subject to payment of the differential tax and penalty as computed by the respondents under section 129 of the Central/Gujarat Goods and Services Tax Act, 2017. - HELD THAT: - The petitioner's counsel informed the Court that the petitioner has paid an amount of tax and penalty as computed by them. On this basis the Court granted interim relief by directing respondents to release the detained vehicle along with the goods contained therein on the condition that the petitioner shall pay the differential amount of tax and penalty between the sum already paid by the petitioner and the amount computed by the respondents under the detention provisions of the GST law. The order implements the principle that detained goods may be released on an interim basis subject to payment of the revenue shortfall as assessed by the authorities, preserving the revenue's claim while providing provisional relief to the petitioner.

The truck No. KA-14-B-6847 and the goods therein are ordered released on interim basis upon payment by the petitioner of the differential tax and penalty between the amount already paid and the amount computed by the respondents under section 129 of the Central/Gujarat Goods and Services Tax Act, 2017.

Waiver of service of notice and permission for direct service - Waiver of service of the rule on behalf of the respondents and permission for direct service. - HELD THAT: - The Assistant Government Pleader expressly waived service of the notice of rule for the respondents, and the Court permitted direct service on the respondents on the date of the order. The Court recorded the waiver and authorised immediate service to facilitate prompt compliance with the interim direction.

Service of the rule is waived on behalf of the respondents and direct service is permitted today.

Final Conclusion: Interim relief granted: the detained truck and goods are to be released upon payment by the petitioner of the differential tax and penalty as computed by the respondents under the GST detention provisions; respondents' counsel waived service and direct service was permitted.

Detention of goods under section 129 of the CGST Act - documents required under section 68 of the CGST Act read with rule 138(A) of the CGST Rules - undervaluation of invoice as a ground for detention - reliability of valuation report - confiscation of goods - interim release on furnishing an undertaking

Reliability of valuation report - confiscation of goods - Court's prima facie view on the reliability of the valuation report prepared for the authorities and its bearing on the proposed confiscation - HELD THAT: - The Court examined the valuation report dated 30.08.2019 prepared by the registered valuer for the Additional Commissioner of Commercial Tax and observed that the report does not inspire confidence. That prima facie assessment formed a basis for judicial caution in dealing with the respondents' proposal to confiscate the petitioner's goods. The observation was limited to the material placed for interim consideration and did not amount to a final adjudication on the correctness of the valuation or on the legality of confiscation. [Paras 2, 3]

The valuation report was regarded as not inspiring confidence for interim purposes, and the Court directed further proceedings by issuing notice.

Detention of goods under section 129 of the CGST Act - documents required under section 68 of the CGST Act read with rule 138(A) of the CGST Rules - undervaluation of invoice as a ground for detention - interim release on furnishing an undertaking - Whether interim release of the detained conveyance and goods should be granted and on what terms - HELD THAT: - The petitioners contended that section 129 of the CGST Act only permits detention on the grounds expressly stated therein and that where the person-in-charge carries the documents and invoice as required under section 68 read with rule 138(A), detention on the basis of alleged undervaluation is not permissible. While the Court did not finally decide the substantive legal controversy, it accepted the petitioners' entitlement to interim relief pending adjudication and issued notice returnable on 3 October 2019. By way of ad-interim relief the Court directed immediate release of the truck and goods, subject to the petitioners filing an undertaking to pay any liability determined against them if they ultimately fail in the litigation. The order is interlocutory and preserves the respondents' rights to contest the substantive issues on the returnable date. [Paras 1, 3]

Immediate release of the vehicle and goods was ordered on the condition of an undertaking by the petitioners; substantive questions are reserved for adjudication on the returnable date.

Final Conclusion: Notice issued returnable on 3 October 2019; on interim consideration the valuation report was found not to inspire confidence and the detained truck and goods were ordered released forthwith subject to an undertaking by the petitioners to pay any liability if they ultimately fail.

Detention of goods under section 129 of the CGST Act - requirements of section 68 of the CGST Act - documents and invoice under rule 138A of the Central Goods and Services Tax Rules, 2017 - confiscation of goods - interim release of detained goods upon undertaking - reliability of valuation report for assessing market value

Detention of goods under section 129 of the CGST Act - requirements of section 68 of the CGST Act - documents and invoice under rule 138A of the Central Goods and Services Tax Rules, 2017 - interim release of detained goods upon undertaking - reliability of valuation report for assessing market value - Whether the detained truck and its goods should be released forthwith on interim terms pending adjudication, having regard to the documents produced and the valuation report relied upon by respondents. - HELD THAT: - The court noted the petitioners' contention that the person in charge of the conveyance produced the documents and invoice as contemplated by section 68 of the CGST Act read with rule 138A of the rules, and that section 129 does not permit detention on grounds other than those specified. The court also observed the valuation report relied upon by the authorities and recorded that the valuation report dated 30.08.2019 did not inspire confidence. Having considered these aspects, the court issued notice returnable on a later date and granted ad-interim relief limited to immediate release of the specific truck and goods, conditioned upon the petitioners filing an undertaking to pay the amount of any liability determined against them if they ultimately fail in the matter. The order leaves the substantive contest on detention, valuation and any possible confiscation to be adjudicated on the returnable date; the interim direction is prudential and protective in nature, prompted by the court's reservation about the valuation report and the pendency of challenge to the validity of detention in the light of produced documents. [Paras 1, 2, 3]

Directed immediate release of truck No. HR-73-7266 with the goods subject to the petitioners filing an undertaking to pay any liability finally determined; notice issued returnable on 3rd October 2019.

Final Conclusion: Notice issued; ad interim relief granted directing immediate release of the detained truck and goods on filing an undertaking to pay any liability ultimately found due, while leaving the substantive validity of detention, valuation and any confiscation to be determined on the returnable date.

Limitation under Section 67 of the Kerala Value Added Tax Act - constitutional validity of Section 174 of the Kerala Goods and Service Tax Act - challenge to penalty orders - remand for fresh consideration - interim stay to continue pending disposal

Limitation under Section 67 of the Kerala Value Added Tax Act - challenge to penalty orders - remand for fresh consideration - The writ petition was restored and remitted to the Single Judge for fresh consideration and disposal of all questions except those relating to the constitutional validity of Section 174 of the KSGST Act. - HELD THAT: - The Single Judge's dismissal had relied on a prior judgment that addressed the constitutional validity of Section 174 of the KSGST Act, but did not consider other grounds raised by the appellant, including the contention that proceedings were time-barred under the limitation provision applicable to the KVAT regime. The Government's counsel conceded that the earlier decision dealt only with the validity of Section 174. In view of the omission to decide the other contentions, the Division Bench set aside the impugned judgment and directed that the writ petition be posted to the Single Judge for fresh adjudication of the remaining issues, thereby restoring the petition for reconsideration and disposal on the merits of those questions. [Paras 4, 5, 6]

Impugned judgment set aside; writ petition restored and remitted to the Single Judge for fresh consideration and disposal except on issues concerning validity of Section 174 of the KSGST Act.

Interim stay to continue pending disposal - The conditional interim order previously granted shall continue in force until disposal of the writ petition. - HELD THAT: - The bench noted that a conditional interim order directing payment of a portion of the disputed amount had been granted earlier and that the appellant has complied with the stipulated condition. Consequently, the interim stay that existed at the time the writ petition was dismissed will continue to operate until the petition is finally disposed of following the remand. [Paras 7]

Existing interim stay shall continue to be in force until the writ petition is disposed of.

Final Conclusion: The appeal is allowed; the impugned judgment is set aside, the writ petition stands restored and remitted to the Single Judge for fresh consideration of issues other than the constitutional validity of Section 174 of the KSGST Act, and the earlier interim stay continues until final disposal.

Rejection of appeal for non-curing of defects - right to cure procedural defects and resubmission - distinction between rejection on procedural grounds and disposal on merits - appellate authority's jurisdiction to record merits only after taking appeal on file - direction to reconsider appeal on merits after curing defects

Rejection of appeal for non-curing of defects - distinction between rejection on procedural grounds and disposal on merits - Validity of the order dismissing the appeal as 'rejected' where defects were noted and findings on merits were recorded. - HELD THAT: - The High Court found that the appellate order (Ext.P5) proceeded to record findings on the merits while treating the appeal as rejected for defects which the appellant could have addressed. The court held that an appellate authority ought not to reject an appeal for procedural defects and, in the same order, adjudicate the substantive merits without first ensuring the procedural defect has been properly and finally determined in accordance with law. The impugned order thereby exceeded the proper exercise of appellate procedure and jurisdiction by conflating defect-based rejection with a merits disposal.

Ext.P5 set aside to the extent it dismissed/rejected the appeal and recorded merits findings while the procedural defect remained unrectified.

Right to cure procedural defects and resubmission - appellate authority's jurisdiction to record merits only after taking appeal on file - direction to reconsider appeal on merits after curing defects - Relief granted and procedure to be followed on remand for reconsideration of the appeal after curing defects. - HELD THAT: - The Court granted the petitioner liberty to remedy the noted deficiencies and re-submit the appeal within a specified short period. On re-presentation, if the appellate authority finds the resubmitted appeal in order, it must take the appeal on file, fix a hearing date and decide the appeal on its merits expeditiously. The direction preserves the appellate authority's competence to adjudicate the merits only after the procedural defect has been cured and the appeal properly placed on its file.

Petitioner permitted to re-submit the appeal within three weeks; appellate authority to take the appeal on file if in order, grant hearing and dispose of the appeal on merits.

Final Conclusion: The writ petition is allowed: the impugned order rejecting/dismissing the appeal and recording merits is set aside; petitioner granted liberty to cure defects and re-submit the appeal within three weeks, and the appellate authority directed to consider and decide the appeal on merits if the resubmission is in order.

Revenue v. Capital Expenditure Distinction - Treatment in Books of Account Not Conclusive for Tax Characterisation - Preoperative or Project Development Costs Treated as Revenue Expenditure - Application of Taparia Tools Ltd. on Capital-Revenue Distinction - Binding Effect of Earlier Coordinate Bench and High Court Decision on Identical Issue

Revenue v. Capital Expenditure Distinction - Treatment in Books of Account Not Conclusive for Tax Characterisation - Preoperative or Project Development Costs Treated as Revenue Expenditure - Application of Taparia Tools Ltd. on Capital-Revenue Distinction - Binding Effect of Earlier Coordinate Bench and High Court Decision on Identical Issue - Deletion by the Tribunal of the assessing officer's disallowance of expenditure claimed as revenue (preoperative/project development costs) was justified. - HELD THAT: - The Tribunal correctly held that the assessee's classification of expenditure in its books of account is not conclusive for determining the tax character of the expenditure, and applied the principle in Taparia Tools Ltd. to distinguish between capital and revenue expenditure. On identical facts, a Coordinate Bench had allowed the claim in Reliance Footprint Ltd., and this Court subsequently dismissed the Revenue's appeal against that decision, which the parties agreed covers the present issue. In view of the binding effect of the Tribunal's reasoning supported by the settled precedent and the earlier High Court decision on identical facts, the question urged by Revenue did not raise any substantial question of law warranting interference with the Tribunal's order. [Paras 5, 6, 7]

The Tribunal's deletion of the disallowance is upheld and the appeal is dismissed.

Final Conclusion: The appeal under section 260 A is dismissed; the Tribunal's order deleting the disallowance in respect of preoperative/project development costs for AY 2008 09 is upheld, the matter being covered by the Court's earlier decision on identical facts.

Certificate for deduction at lower rate under Section 197 - Tax deduction at source (TDS) - Double taxation - Interim injunction restraining tax deduction

Certificate for deduction at lower rate under Section 197 - Tax deduction at source (TDS) - Double taxation - Petition for nil/lower deduction of tax on amounts paid pursuant to the pension second option must be pursued under the statutory mechanism in Section 197 and is to be considered by the appropriate authorities. - HELD THAT: - The Court declined to adjudicate the petitioner's claim for nil deduction on merits and observed that the Income-tax Act provides an existing statutory remedy by which an assessee may apply for a certificate for deduction at nil or lower rate. Section 197 permits the Assessing Officer, on application, to grant such a certificate where the recipient's total income justifies deduction at a lower rate or no deduction. In view of this statutory procedure, the petitioner was directed to file its request before the competent authorities within two weeks; the authorities are to hear the petitioner and decide the representation in accordance with law within six weeks from the conclusion of the personal hearing or by 15th November 2019, whichever is earlier. [Paras 5, 6, 7]

Petitioner must seek nil/lower deduction through application under Section 197; authorities to consider and decide the representation within the prescribed timeframe.

Interim injunction restraining tax deduction - Tax deduction at source (TDS) - Continuation of the interim injunction restraining the banks from effecting tax deduction and retaining deducted amounts pending disposal of the petitioner's representation. - HELD THAT: - The Court noted its earlier interim order (dated 13.06.2011) which had continued an injunction restraining banks from deducting tax at source and, where deductions had been effected, restraining disbursement of corresponding amounts so that they be retained by the banks. Given that the injunction has been in force since 2011 and in view of the direction that the petitioner's representation be decided within the stated timeframe, the Court ordered that the injunction continue until the representation is disposed of or until 15th November 2019, whichever is earlier. [Paras 8]

Existing injunction against deduction/disbursement shall continue until disposal of the representation or until 15th November 2019, whichever is earlier.

Final Conclusion: Writ petition disposed by directing petitioner to file an application under Section 197 within two weeks and by directing the authorities to hear and decide the representation within the stipulated period; the interim injunction against deduction/disbursement shall continue until disposal or until 15th November 2019.

Levy of fee under section 234E - processing of TDS statement under section 200A - filing requirement under section 200(3) - 'challan cum statement' requirement under rule 31A(4A) - prospective application of substituted clause (c) of section 200A w.e.f. 1.6.2015 - automatic levy for delayed statement of tax deducted at source

Prospective application of substituted clause (c) of section 200A w.e.f. 1.6.2015 - levy of fee under section 234E - Whether fee under section 234E could be levied by processing a TDS statement under section 200A for defaults occurring prior to 1.6.2015. - HELD THAT: - The Tribunal examined the fact that clause (c) of section 200A (linking processing under section 200A to computation of fee under section 234E) was substituted with effect from 1.6.2015. Relying on the legislative timing and precedents recognizing that the competence to compute or determine fee under section 234E via section 200A arose only from 1.6.2015, the Tribunal held that demands based on section 200A read with section 234E cannot be validly raised for periods prior to that date. The Tribunal therefore rejected the Department's reliance on later-enacted processing powers to impose section 234E fee for earlier tax periods and accepted the reasoning in authorities holding the computation/determination under section 200A in respect of earlier periods was not authorised prior to 1.6.2015. [Paras 5, 6]

Demand of fee under section 234E could not be levied by invoking section 200A for defaults occurring prior to 1.6.2015; such levy is not sustainable.

Filing requirement under section 200(3) - 'challan cum statement' requirement under rule 31A(4A) - automatic levy for delayed statement of tax deducted at source - Whether the assessee had failed to comply with section 200(3) by not filing the challan-cum-statement after depositing TDS, thereby attracting fee under section 234E. - HELD THAT: - The Tribunal noted that section 200(3) requires preparation and filing of the statement after payment of the tax and that rule 31A(4A) contemplates filing the 'challan cum statement' within seven days of deduction, the term 'challan' indicating the tax must be paid. On the facts the assessee had deposited the tax and furnished the challan and statement prior to 1.6.2015. The Tribunal found no violation of section 200(3) in the circumstances and observed that the levy under section 234E presupposes a breach of the filing requirement, which was not made out here. [Paras 4, 5, 6]

There was no failure to comply with section 200(3) and therefore no basis to impose fee under section 234E in the present case.

Final Conclusion: The appeal is allowed; the demand of fee under section 234E is cancelled because (a) the statutory provision linking section 200A to computation of fee under section 234E took effect only from 1.6.2015 and cannot be applied to the period in question, and (b) on the facts there was no breach of section 200(3) as the challan-cum-statement was filed after payment of tax.

Foreign exchange fluctuation loss - AS-11 (Accounting Standard 11) compliance - treatment of exchange differences as finance charges/interest - capital expenditure versus revenue expenditure - consistency principle in assessment - mandatory compliance with accounting standards by companies - inapplicability of Section 43A to assets purchased in India

Foreign exchange fluctuation loss - AS-11 (Accounting Standard 11) compliance - capital expenditure versus revenue expenditure - treatment of exchange differences as finance charges/interest - mandatory compliance with accounting standards by companies - consistency principle in assessment - Deductibility of foreign exchange fluctuation loss arising on re statement of ECB at year end rates under AS 11 and whether such loss is revenue in nature and allowable under the Act. - HELD THAT: - The assessee had restated External Commercial Borrowings at year end exchange rates and debited the resultant exchange loss to the profit and loss account under "Finance Charges" in accordance with AS 11, which companies are mandatorily required to follow. The foreign lender had not charged interest and the assessee treated the exchange difference as akin to interest/finance charge. The ECB had been utilised for purchase of capital assets in India; however, changes in the ECB value due to exchange fluctuation did not alter the cost of the fixed assets. Reliance was placed on authoritative decisions holding that compliance with AS 11 is mandatory and that exchange differences affecting the loan do not form part of the cost of the asset. The Tribunal further noted that the assessee had consistently routed prior year exchange gains and losses through the profit and loss account and that revenue had accepted that treatment in earlier scrutiny assessments. Applying the principle of consistency and the legal position that revaluation exchange differences on borrowings used for capital asset acquisition do not change asset cost, the Tribunal concluded that the exchange fluctuation loss is not capital in nature but arises on the revenue account and is allowable as a deduction.

Exchange fluctuation loss debited to profit and loss pursuant to AS 11 is revenue in nature and deductible; the assessee's ground is allowed.

Inapplicability of Section 43A to assets purchased in India - capital expenditure versus revenue expenditure - Applicability of Section 43A to the exchange fluctuation loss on ECB utilised to purchase assets in India. - HELD THAT: - The assessing officer relied on Section 43A, but the Tribunal observed that Section 43A is not applicable where the assets were purchased in India. Given the facts that the assets were acquired domestically and the exchange fluctuation did not affect the asset cost, the statutory provision relied upon by the revenue did not support treating the exchange loss as capital. Consequently, the provision could not sustain the disallowance.

Section 43A was found inapplicable to the facts and could not be invoked to characterise the exchange loss as capital.

Final Conclusion: The appeal is allowed: the foreign exchange fluctuation loss arising on restatement of ECB under AS 11 is revenue in nature and deductible for A.Y.2012 13; Section 43A is not applicable to the domestic acquisition of assets and cannot convert the loss into capital expenditure.

Business income versus capital gains - frequency of transactions - intention to trade / business adventure - finding of fact - rule of consistency - admission under Section 260A

Business income versus capital gains - frequency of transactions - intention to trade / business adventure - finding of fact - Short term gains from purchase and sale of equity shares were rightly treated as business income on the facts of the assessment year 2008-09. - HELD THAT: - The Tribunal and Assessing Officer recorded contemporaneous material - audited profit and loss account, treatment of securities as stock in trade, entries showing share trading profit including futures & options, large number of purchase and sale transactions, absence of separate demat account for alleged investments, and significant turnover in specific scrips - which collectively demonstrate a sustained pattern of trading rather than passive investment. Frequency of transactions, engagement in F&O, and the assessee's own records led the Tribunal to conclude that the short term gains were from a trading adventure and not taxable as short term capital gains. The High Court examined the authorities relied upon by the assessee and found them distinguishable on facts, observing that the question in the present appeal is essentially one of fact. Consequently the characterization adopted by the assessing authorities was upheld as a factual conclusion. [Paras 12, 16, 17, 18, 19]

The finding that the short term gains are business income is a factual conclusion and is upheld.

Rule of consistency - finding of fact - Prior appellate orders in earlier assessment years did not preclude the Tribunal from reaching a different factual conclusion for the assessment year 2008-09. - HELD THAT: - The Court noted that earlier favourable orders for the assessee were distinguishable because the factual matrix changed - in particular the magnitude and frequency of transactions increased and the assessee engaged in trading in F&O. The Tribunal therefore was not bound to apply the rule of consistency when intervening facts and scrutiny differed; determination remained fact specific.

Earlier appellate treatment did not estop the Revenue or bind the Tribunal where facts for the year under appeal differed.

Admission under Section 260A - No substantial question of law arises warranting admission of the appeal under Section 260A. - HELD THAT: - Having held that the impugned conclusions are based on findings of fact - namely frequency of transactions, audited trading treatment, and engagement in F&O - the High Court found no substantial question of law for its consideration. The Court rejected the contention that the issue raised any pure question of law, noting that the precedents cited by the assessee were factually distinguishable and did not undermine the factual basis of the Tribunal's conclusion.

Admission under Section 260A is declined as no substantial question of law arises.

Final Conclusion: The High Court declined admission of the appeal: the Tribunal's factual finding that the short term gains constituted business income for assessment year 2008 09 is upheld and no substantial question of law arises.

Genuineness of transactions - bogus accommodation entries - denial of exemption under Section 10(38) - appreciation of evidence and findings of fact - Long Term Capital Gains

Genuineness of transactions - denial of exemption under Section 10(38) - appreciation of evidence and findings of fact - Whether the long term capital gains claimed by the assessee from sale of shares were genuine and liable for exemption under Section 10(38), or were bogus receipts to be added back to income. - HELD THAT: - The Court accepted the concurrent findings of the Assessing Officer, the CIT(A) and the Tribunal that the transactions were not genuine. The Tribunal examined the company's published financials and found the extraordinary rise in share price and resulting returns to be unsupported by the company's earnings, EPS and other financial parameters. The assessee produced only contract notes and bank cheques; no independent evidence of genuine commercial transactions or of the buyer's justification for paying the quoted prices was furnished. The company was identified by the exchange as a penny stock used for generating bogus LTCG, and enquiries by the Revenue and supporting judicial precedent were held to corroborate the conclusion of accommodation entries. The Court held that these findings represented an appraisal of evidence and were not perverse, and therefore there was no substantial question of law warranting interference. [Paras 6, 7, 8, 9]

Concurrent factual findings upholding denial of exemption under Section 10(38) were sustained and the addition of the claimed LTCG was upheld; the appeal is dismissed.

Final Conclusion: The High Court found no merit in the appeal against the Tribunal's factual conclusion that the claimed long term capital gains were bogus; concurrent findings were upheld and the appeal dismissed.

Reopening of assessment - reason to believe - mere change of opinion - consideration of evidence in original assessment - reassessment under Sections 147/148 - transactional transfer pricing consideration

Consideration of evidence in original assessment - reopening of assessment - Validity of reopening the assessment where the Assessing Officer had called for, received and consciously considered the details relating to the disputed payment in the original scrutiny assessment. - HELD THAT: - The Court found on the record that the Assessing Officer had called for and examined the agreements and details relating to the lump-sum Technical Know-How Fee during the original assessment proceedings and that the Transfer Pricing Officer had also considered the payment and made adjustments which were reflected in the assessment order. Where the Assessing Officer accepts the explanation and does not make additions or disallowances in the original order, that evidences that the issue was considered and an opinion was formed at that stage. Reopening thereafter by re-examining the same material and drawing a different inference amounts to a mere change of opinion which is not a permissible basis for reassessment under Sections 147/148. The Tribunal correctly applied these principles to set aside the reassessment. [Paras 9, 10]

Reopening of assessment was invalid because the disputed payment had been actively and consciously considered in the original assessment, and subsequent reassessment amounted to an impermissible change of opinion.

Reason to believe - mere change of opinion - reassessment under Sections 147/148 - Whether the Assessing Officer had 'reason to believe' escapement of income in circumstances where the material before him at original assessment was the same as that relied upon later for reopening. - HELD THAT: - The Court reiterated that reassessment jurisdiction under Section 147 requires 'reason to believe' and not merely a change of opinion. Drawing upon the Supreme Court's ruling in Kelvinator, the Court emphasised that reassessment must be supported by tangible material which bears a live link to formation of belief about escaped income. In the present facts, the material had been earlier placed before the Assessing Officer (and examined by the Transfer Pricing Officer), and the later reassessment involved re-examining the same material to arrive at a different conclusion; thus there was no fresh tangible material establishing a bona fide 'reason to believe' of escapement of income. [Paras 10, 11]

No valid 'reason to believe' existed to justify reopening; reassessment was based on mere change of opinion and therefore unsustainable.

Final Conclusion: The Revenue's appeal is dismissed. The reopening and reassessment under Sections 147/148 for Assessment Year 2003-2004 was quashed as being founded on a mere change of opinion where the Assessing Officer and the Transfer Pricing Officer had already considered the disputed payment in the original proceedings.

Addition under section 68 - unexplained loans and cash credits - Onus to prove identity, creditworthiness and genuineness of creditors - Proof by banking channel, confirmations, ITR and ledger entries - Obligation of the Assessing Officer to verify creditors and their sources - No adverse inference for non-response of creditors where assessee has discharged onus - Repayment in subsequent year as corroborative evidence of genuineness

Addition under section 68 - unexplained loans and cash credits - Onus to prove identity, creditworthiness and genuineness of creditors - Proof by banking channel, confirmations, ITR and ledger entries - Obligation of the Assessing Officer to verify creditors and their sources - No adverse inference for non-response of creditors where assessee has discharged onus - Repayment in subsequent year as corroborative evidence of genuineness - Validity of addition of Rs.65 lakhs under section 68 where assessee produced confirmations, ITRs, bank statements and evidence of repayment but AO did not verify creditors - HELD THAT: - The Tribunal found that the assessee had produced ledger accounts, confirmations, copies of ITRs, bank statements and other documents in respect of the three creditors and that the transactions were effected through banking channels with subsequent repayments when deals failed. No defect in the books of account was pointed out. The Assessing Officer did not make independent verification of the creditors or examine the source of their funds from tax records despite the creditors being assessed to tax and PAN details being available. In these circumstances the Tribunal held that the assessee discharged the onus cast under section 68 by proving identity, creditworthiness and genuineness of the advances and by showing repayment; consequently adverse treatment could not be sustained merely because the creditors did not respond to summons. The Tribunal relied on the principle that where the assessee furnishes credible documentary evidence and the AO omits to verify available records, the addition is not justified, applying precedents invoked in the proceedings including Orissa Corporation , Rohini Builders , Nemichand Kothari , Ayachi Chandrashekhar Narsangji , Kapoor Chand Mangesh Chand , Divine Leasing and Finance Ltd. , Winstrall Petro Chemicals Pvt. Ltd. and Value Capital Services Pvt. Ltd. ; on the facts the authorities below erred in sustaining the addition.

Addition of Rs.65 lakhs under section 68 deleted and the appeal allowed.

Final Conclusion: The Tribunal set aside the orders of the authorities below, held that the assessee had discharged the onus in respect of the advances by documentary evidence and repayments through banking channels, and deleted the addition made under section 68 for AY 2010-2011.

Tax Deduction at Source (TDS) on rent versus contract payments - Liability to deduct TDS on reimbursements and payments to service providers - Admissibility of additional evidence under Rule 46A of the Income Tax Rules

Tax Deduction at Source (TDS) on rent versus contract payments - Admissibility of additional evidence under Rule 46A of the Income Tax Rules - Whether the payment of Rs. 4,04,496 to exhibition organisers for allotment of stall is taxable as rent attractible to TDS under the provision dealing with rent, or is payment for services attractible to TDS under contract provisions; and whether the additional document filed by the assessee could be admitted. - HELD THAT: - The Tribunal concurred with the authorities below that the assessee paid for allotment of exhibition space (a property rented for a limited time) to carry on its business activities and failed to produce a contract before the assessing officer to demonstrate that the payment was for services rather than rent. The application-form-document filed during appeal was a prescribed printed form and not a contract; its belated production was not admitted under Rule 46A. There was no other evidence on record to show provision of special services by the organisers that would transform the transaction into a composite service. The Supreme Court decision relied upon by the assessee (concerning composite airport services) was held distinguishable and not supportive. The AO was, however, directed to exclude the service-tax component from TDS since TDS is not deductible on service tax. [Paras 4, 7]

Payment for stall allotment held to be in the nature of rent; TDS liability under the provision dealing with rent confirmed, additional evidence not admitted; AO to revise demand excluding the service-tax component.

Liability to deduct TDS on reimbursements and payments to service providers - Tax Deduction at Source (TDS) on payments to contractors - Whether the payment of Rs. 2,00,193 for advertising boards and related works was a mere reimbursement (no TDS liability) or a payment to service providers on which the assessee was liable to deduct TDS under the contract provisions. - HELD THAT: - The Tribunal accepted the finding of the CIT(A) that the expenditure was claimed in the assessee's books and payments were shown in the name of the service providers (M/s. Balaji and M/s. Allshreshtha) who rendered the services, and not in the name of the customers/distributors. The assessee did not rebut these findings or produce evidence to substantiate that the amounts were mere reimbursements. On the material on record, the payments were held to be for services and therefore attract TDS under the contract provision. [Paras 8, 11]

Addition under printing and stationery upheld; payments held not to be mere reimbursements and TDS under the contract provision sustained.

Final Conclusion: Appeal dismissed; payments for exhibition stall treated as rent attracting TDS under rent provisions (with direction to exclude service tax component), and payments for advertising/printing held to be payments to service providers attracting TDS under contract provisions.

Date of acquisition for capital gains - allotment letter as transfer of title under deferred payment/allotment schemes - long-term versus short-term capital asset - application of CBDT Circular No.471 (allotment under self financing schemes) - deduction under section 54 and section 54F

Date of acquisition for capital gains - allotment letter as transfer of title under deferred payment/allotment schemes - application of CBDT Circular No.471 (allotment under self financing schemes) - long-term versus short-term capital asset - Date of acquisition of the plot is the date of allotment (31.05.2002) and the asset is a long-term capital asset. - HELD THAT: - The Tribunal accepted the principle in the Bombay High Court decision construing CBDT Circular No.471 that, for allotment schemes, title effectively vests on issuance of the allotment letter and payment/installments are consequential, so the date of allotment must be treated as date of acquisition. Although the earlier authorities treated the conveyance dated 27.12.2011 as the date of ownership, the Tribunal held that the nature of the immovable (plot vs. residential flat) does not alter the legal principle for determining acquisition date. Applying that principle to the facts, the allotment date 31.05.2002 is to be treated as the date of acquisition, hence the sale on 28.03.2013 falls beyond 36 months and the profit is long term capital gain. The findings of the lower authorities on this question are therefore reversed. [Paras 7]

Findings of lower authorities reversed; date of acquisition fixed as allotment date and the asset held to be a long-term capital asset.

Deduction under section 54 and section 54F - long-term versus short-term capital asset - Allowability of deduction under section 54/54F is not finally adjudicated and is remitted for fresh decision. - HELD THAT: - Because the Tribunal has held that the asset is a long term capital asset and the resulting gain is long term, the appellant's entitlement to exemption under section 54/54F (previously denied by AO and CIT(A) on the premise that the asset was short term and on subsidiary factual findings about source of funds and joint registration) was not decided on merits by the Tribunal. The Tribunal restored ground No.3 to the file of the CIT(A) with a direction to reconsider the alternative claim under section 54/54F after affording the assessee an opportunity of hearing and to determine issues such as the source of funds and joint ownership in accordance with law. [Paras 8]

Ground No.3 remanded to the CIT(A) for fresh adjudication on the claim for deduction under section 54/54F after hearing and verification.

Final Conclusion: Appeal allowed in part: the transfer is held to be of a long term capital asset (grounds 1 and 2 allowed) and the question of exemption under sections 54/54F is remitted to the CIT(A) for fresh decision after hearing (ground 3 restored).

Arm's length price - intra-group services - Transactional Net Margin Method - profit level indicator - comparability of independent enterprises - requirement of contemporaneous evidence of services, costs and benefits - determination of ALP by TPO/DRP - remand for fresh consideration to TPO/AO

Arm's length price - intra-group services - requirement of contemporaneous evidence of services, costs and benefits - determination of ALP by TPO/DRP - remand for fresh consideration to TPO/AO - Determination of ALP of payments made to the Associated Enterprise for intra-group administrative and business support services - HELD THAT: - The Tribunal examined whether the assessee had established that amounts paid to the AE for intra group services satisfied the arm's length principle. The assessee relied on a TNMM study with a set of comparables and documentary material, much of which was placed before the DRP. The TPO and DRP concluded that no real and substantial services or quantification of AE's costs and resultant benefit to the assessee had been shown and therefore treated the ALP as nil (with an added mark up). The Tribunal reviewed the relevant jurisprudence and distilled the parameters to be considered - existence and nature of services received, quantum of services, that services meet a specific need of the recipient, economic and commercial benefits derived, and whether independent enterprises in comparable circumstances would pay for such services. On the record the Tribunal found that many documents were general, some were not contemporaneous, and the assessee had not sufficiently demonstrated how the services were actually rendered and how costs and benefits were allocated and quantified. Given these evidentiary gaps and the fact that several documents relied upon were filed before the DRP but not considered adequately by the TPO/AO, the Tribunal did not decide the ALP on merits but directed that the matter be examined afresh by the TPO/AO with an opportunity to the assessee to lead cogent and contemporaneous evidence and explain existing material in light of the parameters established by precedent. [Paras 18, 19, 20]

Impugned order set aside and the issue of ALP for intra group services remanded to the TPO/AO for fresh consideration; appeal treated as allowed for statistical purposes.

Final Conclusion: The Tribunal found that the assessee had not, on the material before the TPO/AO, satisfactorily established that payments for intra group administrative and business support services were at arm's length; accordingly the assessment order was set aside and the determination of ALP remanded to the TPO/AO for fresh consideration with direction to allow the assessee to place cogent contemporaneous evidence and to apply the established ALP parameters.

Admission of additional evidence under Rule 46A of the Income-tax Rules - Recording reasons for admission under Rule 46A(2) - Obligation to afford the Assessing Officer a reasonable opportunity under Rule 46A(3) - Distinction between Rule 46A and the appellate power under section 250(4)

Admission of additional evidence under Rule 46A of the Income-tax Rules - Recording reasons for admission under Rule 46A(2) - Obligation to afford the Assessing Officer a reasonable opportunity under Rule 46A(3) - Whether the Commissioner (Appeals) properly admitted and acted upon additional evidence produced by the assessee in appeal without complying with the procedural requirements of Rule 46A. - HELD THAT: - The Tribunal found that the CIT(A) admitted additional evidence but did not specify which exception in Rule 46A(1) applied and failed to demonstrate compliance with the mandatory prescription of Rule 46A(2) to record reasons for admission. More critically, after admitting the evidence the CIT(A) did not afford the Assessing Officer the statutory, reasonable opportunity to examine the evidence or to rebut it as required by Rule 46A(3). The Bench emphasised that invocation of the CIT(A)'s inherent or suo motu powers under section 250(4) cannot be used to circumvent the procedural safeguards of Rule 46A when the assessee seeks admission of fresh evidence; conflating those powers would render Rule 46A ineffective. Reliance was placed on the decisions of the Jurisdictional High Court and coordinate benches which require strict compliance with Rule 46A, particularly sub-rule (3), before additional evidence can be taken into account. Having found these procedural defaults, the Tribunal held that the CIT(A)'s conclusions based on the admitted additional evidence could not stand.

Admission and consideration of the additional evidence by the CIT(A) was procedurally flawed for failure to identify applicable Rule46A(1) clause(s), to record reasons under Rule46A(2), and to afford the Assessing Officer the reasonable opportunity mandated by Rule46A(3); the appellate order is therefore set aside on this point.

Distinction between Rule 46A and the appellate power under section 250(4) - Remand for fresh consideration - What remedial direction should follow from the procedural defects in admission of additional evidence by the CIT(A). - HELD THAT: - Because the CIT(A) did not comply with the mandatory procedure in Rule 46A, the Tribunal recalled the settled principle that Rule 46A's requirements must be scrupulously observed when an assessee seeks to place fresh evidence before the first appellate authority. The Tribunal therefore set aside the CIT(A)'s order and remitted the matter for fresh disposal. The Tribunal directed that if the CIT(A) admits additional evidence on remand, she must explicitly identify which clause(s) of Rule 46A(1) are relied upon, record reasons as required by Rule 46A(2), and ensure the Assessing Officer is given the reasonable opportunity required by Rule 46A(3) to examine, cross examine or rebut the evidence. The Tribunal made clear that these steps are necessary regardless of any unrelated exercise of powers under section 250(4).

Impugned appellate order set aside and the matter remitted to the CIT(A) for fresh decision in accordance with Rule 46A; directions issued to record applicable clause(s) of Rule46A(1), reasons under Rule46A(2), and to afford the Assessing Officer the reasonable opportunity under Rule46A(3).

Final Conclusion: The Tribunal set aside the CIT(A)'s order insofar as it admitted and relied on additional evidence without complying with Rule 46A; the matter is remitted to the CIT(A) to decide afresh, observing the mandatory requirements of Rule 46A(1)-(3) (identifying the applicable exception(s), recording reasons, and providing the Assessing Officer a reasonable opportunity to examine and rebut the evidence).

Rejection of books of accounts under section 145(3) - estimation of income by applying a percentage of turnover - survey under section 133A and disclosure of undisclosed turnover - acceptance of book results - partial rejection of books of accounts - valuation of work-in-progress affecting profit computation

Rejection of books of accounts under section 145(3) - estimation of income by applying a percentage of turnover - survey under section 133A and disclosure of undisclosed turnover - partial rejection of books of accounts - Whether the books of accounts of the assessee could be rejected and net profit estimated at 9% of turnover, and whether the addition confirmed by the Commissioner (Appeals) was sustainable. - HELD THAT: - The Tribunal held that the Assessing Officer's rejection of the books was founded on an erroneous comparison which ignored that the sum of Rs. 5,62,00,000 identified during the survey had been included by the assessee in the contract business turnover. The AO had reduced that sum from the disclosed profit and then compared profit ratios, thereby arriving at a mistaken conclusion of drastic decline in profit. The survey statements on record show the impounded pocket diaries represented cash component of sale receipts, and the assessee had included that amount in his return. Comparative charts of gross and net profit for preceding years demonstrated that both ratios had increased in the year under consideration. The Tribunal further noted that consolidated audited financial statements and division-wise details were available to deduce contract-business profitability, and that the Commissioner (Appeals) had effectively applied a partial rejection of books by excluding non-contract receipts while estimating profit. On these facts the Tribunal concluded that there was no justification for rejection of books under section 145(3) or for estimating net profit at 9% on the turnover; consequently the addition sustained by the CIT(A) must be deleted and the book results accepted. [Paras 5, 6]

Addition of Rs.2,60,19,675/- by estimating net profit at 9% is deleted and the assessee's book results are accepted.

Final Conclusion: The assessee's appeal is allowed: the Tribunal set aside the estimation and deletion of book results, directed acceptance of the audited books, and deleted the addition made on estimated net profit for A.Y.2012-13.

Penalty under Section 271(1)(c) - Short-term capital gains - Deeming under Section 50C - Block of assets and computation under Section 50 - Remand for fresh adjudication and verification by Assessing Officer

Penalty under Section 271(1)(c) - Short-term capital gains - Block of assets and computation under Section 50 - Deeming under Section 50C - Remand for fresh adjudication and verification by Assessing Officer - Validity of penalty imposed under Section 271(1)(c) in respect of alleged undisclosed short term capital gain on sale of a gala, having regard to the assessee's contention that no STCG arose under Section 50 as the asset formed part of a block - HELD THAT: - The assessee did not disclose the sale of the gala in the return; the Assessing Officer adopted the segment value under Section 50C and assessed STCG. Penalty under Section 271(1)(c) was imposed for concealment. Before the Tribunal the assessee for the first time advanced a substantive factual-leg al contention that as two galas formed a single block of assets and on facts the block did not cease and the consideration did not exceed the aggregate written down value, no STCG arose under Section 50. The Tribunal found the contention legally plausible but factually unsupported on record (absence of balance sheet/schedules) and therefore not capable of being accepted summarily. Because the question whether the assessee's factual case establishes that no STCG arose is determinative of the penalty, the Tribunal directed that the matter be restored to the Assessing Officer for fresh adjudication and verification of the assessee's claim; if the AO finds the assessee's factual position to be in order, the penalty shall be vacated. [Paras 8, 9, 10, 11]

Matter restored to the file of the Assessing Officer for fresh adjudication and verification of the assessee's contention regarding the block of assets and the consequent non existence of STCG; pending such verification the penalty decision is not finally sustained by the Tribunal.

Final Conclusion: The Tribunal, while observing that the assessee's newly raised contention could, if proved, negate the STCG and thereby the penalty, remanded the matter to the Assessing Officer for fresh verification; the appeal is disposed of for statistical purposes in terms of that remand.

Addition on account of bogus purchases - rejection of books of account in terms of Section 145(3) - estimation of income on a reasonable basis - allowance of declared gross profit as credit against estimated addition - remand for verification and computation - search and assessment under Section 132 / Section 153A read with Section 143(3)

Addition on account of bogus purchases - rejection of books of account in terms of Section 145(3) - estimation of income on a reasonable basis - allowance of declared gross profit as credit against estimated addition - remand for verification and computation - Whether the assessing officer was justified in adding the entire purchases from KIL/SCIL as bogus to the assessee's income, and whether the CIT(A)'s restriction of the addition to 12.5% of such purchases after allowing credit for declared gross profit was correct. - HELD THAT: - The Tribunal recorded that search and seizure proceedings revealed allegations of accommodation entries routed through the assessee and that the Assessing Officer treated the purchases from KIL/SCIL as bogus after finding non-establishment of deliveries in certain amounts. The CIT(A) examined the material including remand report, confirmations, MVAT and assessment orders relating to the supplier which indicated a substantial percentage of bogus purchases on the supplier's side, and concluded that the assessee's books were incorrect to the extent of such purchases in terms of Section 145(3). However, having regard to the trading nature of the business, recorded purchases and undisputed sales, and the need for a reasonable estimate where books are rejected, the CIT(A) applied the judicially accepted principle of estimating the profit element rather than adding entire purchases. Following earlier tribunal decisions, CIT(A) estimated the addition at 12.5% of the disputed purchases and directed allowance of the gross profit already declared by the assessee in recomputing the addition. The ITAT found that the CIT(A)'s order was reasoned, that the remand report had been considered, and that no positive material was produced by the Department to disturb the assessment of the addition on the basis adopted by CIT(A). The ITAT therefore declined to interfere with the estimate and the direction to verify and recompute by allowing declared GP as credit. [Paras 5, 9]

The CIT(A)'s restriction of the addition to 12.5% of purchases from SCIL/KIL after allowing credit for the gross profit declared by the assessee is upheld and the revenue's appeals are dismissed; remand directions for verification and recomputation are to be carried out by the Assessing Officer.

Final Conclusion: The Tribunal upheld the appellate authority's reasoned estimation of income on account of disputed purchases - restricting the addition to 12.5% of such purchases subject to credit for declared gross profit - and dismissed the revenue's appeals and the assessee's cross objections for A.Ys. 2008-09 to 2010-11.

Requirement to challenge assessment before seeking refund - self-assessment and appealability of bill of entry - refund claim under Section 27 of the Customs Act - speaking order under Section 17(5) of the Customs Act

Refund claim under Section 27 of the Customs Act - requirement to challenge assessment before seeking refund - self-assessment and appealability of bill of entry - Whether the petitioner could maintain a refund claim without first getting the assessment of the Bills of Entry modified on appeal in view of the law declared by the Supreme Court in ITC Ltd. - HELD THAT: - The Court considered the decisions in Flock (India) and Priya Blue which held that an adjudicating/assessment order, if appealable and not challenged, cannot later be questioned by way of a refund claim. Earlier High Court decisions (Aman Medical; Micromax) had distinguished those precedents where duty was "borne" or paid without a contest (self-assessment), holding in such cases that a refund claim could be entertained without a prior appeal. The Supreme Court's three-Judge decision in ITC Ltd. has authoritatively held that even where assessment is by self-assessment, such endorsement on the bill of entry amounts to an order of assessment which is appealable and, accordingly, Section 27 cannot be invoked to set aside an order of self-assessment; a refund claim is in the nature of execution and cannot be used to reassess or modify the assessment. Applying that binding declaration, the Court held that the Assistant Commissioner's observation that the petitioner ought to have appealed against the assessment of the three Bills of Entry was correct, and that a refund claim could be maintained only after the assessment stood reversed on appeal. The Court declined to adjudicate on limitation or merits of any future appeal, but permitted the petitioner to prefer an appeal and directed the respondents to decide any such appeal in accordance with law. [Paras 24, 28]

The petitioner's refund claim cannot be entertained unless the assessment of the three Bills of Entry is first modified on appeal; the petitioner is permitted to prefer an appeal which the respondents are directed to decide in accordance with law.

Final Conclusion: In view of the Supreme Court's decision in ITC Ltd., the writ petition was disposed of by holding that a refund could be claimed only after the assessment of the Bills of Entry is modified on appeal; the petitioner was granted liberty to prefer an appeal against the assessments and the respondents were directed to decide it in accordance with law.

Routine questions of law - Substantial question of law - Decline to exercise discretionary reference jurisdiction - Delay and laches in seeking adjudication - Tribunal's possible view - Refund of duty on re-exported imported ship's stores

Routine questions of law - Substantial question of law - Delay and laches in seeking adjudication - Decline to exercise discretionary reference jurisdiction - Whether the High Court should answer the questions referred by the tribunal or dismiss the reference. - HELD THAT: - The Court examined the terms of reference comprising routine legal questions concerning levy and refund of duty on imported ship's stores and the applicable Customs provisions and notifications. The Court observed that no substantial question of law requiring its determination was presented; the tribunal had taken a possible view and the matters raised were ordinary points of law. The Court further noted the significant lapse of time (over 25 years) since the tribunal's order. In light of these considerations the Court exercised its discretion to decline taking notice of the reference for adjudication, refused to set aside the tribunal's order or to direct a fresh decision on the merits, and held that answering the routine questions or remitting the matter for fresh consideration was not warranted.

Reference dismissed; Court declined to answer the referred questions and dismissed the reference application for want of a substantial question of law and in view of the long delay.

Final Conclusion: The reference application is dismissed: the High Court declined to entertain the routine questions referred by the tribunal, finding no substantial question of law and noting the long delay, and therefore refused to answer the questions or order fresh adjudication.

Penalty under Section 112(a) of Customs Act - penalty under Section 114AA of Customs Act - value determined by settlement commission under Section 14 - confiscation under Section 111(m) - liability for abetting misdeclaration - effect of settlement by main noticee on co-noticees' liability - relevance of legislative history and external aids in statutory interpretation

Value determined by settlement commission under Section 14 - confiscation under Section 111(m) - liability for abetting misdeclaration - penalty under Section 112(a) of Customs Act - effect of settlement by main noticee on co-noticees' liability - Sustainability of penalties under Section 112(a) against appellants who abetted misdeclaration where the importer who filed the Bill of Entry admitted undervaluation and settled the duty through the Settlement Commission. - HELD THAT: - The Tribunal held that once the person who filed the Bill of Entry admitted the undervaluation and paid the differential duty and the matter was settled by the Settlement Commission, the value so determined becomes the value for the purposes of Section 14. A declared value established in that manner makes the goods liable to confiscation under Section 111(m), and persons who misdeclare or who abet such misdeclaration are liable to penalty under Section 112(a). The fact that the main importer settled the matter before the Settlement Commission does not automatically oust separate adjudication of liability of other noticees; whether immunity extends depends on whether the co-noticee's acts constitute distinct offending acts or are part of the same single offending act. The Tribunal therefore found no merit in appellants' contention that the Commission should have re-determined value afresh under the Valuation Rules or that settlement by the importer conclusively absolved the appellants of penalty liability. [Paras 4]

Penalties under Section 112(a) against the appellants are sustainable and the appeals in respect of those penalties are dismissed.

Penalty under Section 114AA of Customs Act - liability for abetting misdeclaration - relevance of legislative history and external aids in statutory interpretation - Applicability of Section 114AA to appellants alleged to have caused filing of documents misdeclaring value, and whether Section 114AA is limited to fraudulent exports to avail export-promotion benefits. - HELD THAT: - The Tribunal found that appellants Shri Kaushal A. Shah and Shri Jiten Shah were responsible for issuance of the invoice that formed the basis for filing the Bill of Entry misdeclaring value; having been shown to have caused or filed documents misdeclaring value, Section 114AA is attracted. The appellants' submission that Section 114AA applies only to fraudulent exports (based on parliamentary committee material) was rejected. Following the principle that where statutory language is plain and unambiguous courts cannot rely on external aids to defeat the statute's clear meaning, the Tribunal declined to give the 27th Report or departmental notings determinative weight and upheld the imposition of penalty under Section 114AA on the persons responsible for the offending documents. [Paras 4]

Penalty under Section 114AA was lawfully imposed on the appellants found responsible for issuing the misdeclaring invoice; the challenge to applicability based on external legislative history is repelled.

Penalty under Section 112(a) of Customs Act - Whether penalties were imposed both on proprietorship concerns and on their proprietors separately in the adjudication order. - HELD THAT: - The Tribunal observed that the adjudication order itself refrained from imposing penalty under Section 112(a) on the proprietors because penalties under that section had been imposed on the proprietorship firms. Thus there was no double imposition of the same penalty on both the firm and its proprietor in the adjudication impugned before the Tribunal. [Paras 4]

No penalty was imposed separately upon the proprietors under Section 112(a) in the adjudication order.

Final Conclusion: The appeals are dismissed; the Tribunal upheld the penalties imposed under Sections 112(a) and 114AA on the appellants found to have caused or abetted misdeclaration of value, rejected the contention that settlement by the importer immunised the appellants as a matter of law, and noted that the adjudicating authority did not impose duplicate penalties on proprietors and their proprietorship concerns.

Classification of optical fibre cables under the Customs Tariff - Non-availability of exemption notification benefit on reclassification - Section 28(2B) - pre-notice voluntary payment and bar on issuance of notice - Proviso to Section 28(1) - invocation of extended period for recovery - Appropriation of amounts voluntarily deposited during investigation

Classification of optical fibre cables under the Customs Tariff - Non-availability of exemption notification benefit on reclassification - Imported 48F Optical Fibre Cable are classifiable under CTH 90011000 and the benefit of Notification No. 24/2005-Cus is not available to the importer. - HELD THAT: - The Tribunal followed the Larger Bench decision in Vodafone Essar Gujarat relating to classification under Chapter 90 and applied that precedent to hold that the imported OFC are classifiable under 90011000. Consequently the exemption claimed under Notification No. 24/2005-Cus, which was premised on classification under heading 8544, is not available. The adjudicating authority's classification was therefore upheld and the finding that the notification benefit could not be availed was affirmed.

Classification under CTH 90011000 upheld and benefit of Notification No. 24/2005-Cus denied.

Section 28(2B) - pre-notice voluntary payment and bar on issuance of notice - Proviso to Section 28(1) - invocation of extended period for recovery - Appropriation of amounts voluntarily deposited during investigation - Revenue cannot appropriate or invoke the protection of Section 28(2B) for amounts voluntarily deposited once it has issued a show cause notice invoking the proviso to Section 28(1); amounts deposited prior to issuance of notice are not to be appropriated by revenue where the adjudication proceeds under the extended period and the adjudicating authority finds extended period not invokable. - HELD THAT: - The Tribunal interpreted sub section (2B) and concluded that the legislative scheme bars issuance of a notice in respect of duty or interest paid and informed to the proper officer before service of notice. By choosing to issue a show cause notice invoking the proviso to Section 28(1) (extended period), revenue elected not to accept settlement under Section 28(2B). Once proceedings are initiated under the proviso, the adjudicating authority must determine the matter on the basis of the notice; if it finds the extended period not invokable, it must drop the demand to that extent even though amounts were deposited earlier. The Tribunal relied on precedent (including Powerica Ltd and the Larger Bench in Al Falah Exports) to hold that revenue cannot subsequently seek appropriation under Section 28(2B) after opting for extended period adjudication.

Revenue's contention for appropriation under Section 28(2B) rejected; deposited amounts cannot be appropriated once revenue issued notice invoking the extended period and failed to establish the proviso.

Final Conclusion: The revenue appeal is dismissed; the Commissioner's order holding the goods classifiable under CTH 90011000 and denying the notification benefit is upheld, and the revenue cannot appropriate pre notice deposits or invoke Section 28(2B) after issuing the show cause notice; cross objections are disposed of upholding the impugned order.

Confiscation of imported goods - undervaluation - mandatory BIS certification/non-compliance - redemption fine in lieu of confiscation - penalty under Section 112 - penalty under Section 114AA - provisional release and re-export does not bar redemption fine

Confiscation of imported goods - mandatory BIS certification/non-compliance - undervaluation - Imported goods were liable for confiscation under the Customs Act for undervaluation and for import in violation of mandatory BIS requirements. - HELD THAT: - The Tribunal accepted the factual finding that the goods declared by the appellant were undervalued and that the importer and CHA could not produce the required BIS certificate, instead attempting to substitute another certificate. Those irregularities were accepted on record including the appellant's admission. In consequence, goods imported contrary to statutory requirements and declared incorrectly are liable to confiscation under Section 111. Reliance on precedents cited by the appellant was considered and distinguished as not advancing the appellant's case on these facts. [Paras 3]

Findings of liability to confiscation under Section 111 for the imported goods are upheld.

Redemption fine in lieu of confiscation - provisional release and re-export does not bar redemption fine - Redemption fine under Section 125 could be imposed despite provisional release and subsequent re-export of the goods. - HELD THAT: - The Tribunal followed binding precedent that the fact of provisional release on bond and subsequent re-export does not deprive authorities of power to impose redemption fine where importation is found irregular. The adjudicating authority had lawfully imposed redemption fines in lieu of confiscation because the goods had been re-exported and were not available for physical confiscation; earlier authorities cited by appellant were not held to be applicable in the circumstances. [Paras 3]

Redemption fine imposed in lieu of confiscation is sustained.

Penalty under Section 112 - penalty under Section 114AA - Penalty under Section 112 and Section 114AA imposed on the importer is sustainable; the appellant's plea of non-involvement or victimhood and reliance on acts of a third party was rejected. - HELD THAT: - The Tribunal noted that the importer admitted irregularities and that the role of the proprietor and firm in the importation made them liable to penalty. The contention that a third party had misused the firm did not negate liability in view of admitted irregularities and statutory scheme making the importer liable. The Tribunal therefore sustained the imposition of penalties upon the appellant firm under Sections 112 and 114AA. [Paras 3]

Penalties under Section 112 and Section 114AA as imposed on the appellant are upheld.

Final Conclusion: The appeal by M/s United Traders is dismissed; confiscation liability, redemption fine in lieu of confiscation, and penalties imposed on the appellant are affirmed. The Tribunal declined to order refund of deposits, noting that the matter raised was not decided in the impugned order and that the appellant must pursue recovery/establishment of any claim before the Customs authorities.

Provisional assessment under the Customs Act, 1962 - assessment under Section 17 of the Customs Act, 1962 - appeal under Section 128 of the Customs Act, 1962 - release of detained goods during pendency of appeal - equity and fair play - security for differential duty in lieu of bank guarantee or cash - detention memo

Appeal under Section 128 of the Customs Act, 1962 - provisional assessment under the Customs Act, 1962 - Direction to the Commissioner of Customs (Appeals) to decide the pending statutory appeal filed by the petitioner against the final assessment order. - HELD THAT: - The petitioner had challenged the final assessment order dated 27.08.2019 by filing a statutory appeal under Section 128 and had deposited 7.5% of the demanded differential duty. Given the availability and exercise of the statutory remedy by the petitioner, the Court found it appropriate to require the appellate authority to decide the pending appeal within a defined timeframe. In the exercise of supervisory jurisdiction the Court directed the Commissioner of Customs (Appeals) to decide the appeal within three months from receipt of the certified copy of this order, thereby ensuring expeditious adjudication of the statutory remedy already invoked by the petitioner. [Paras 4, 6]

The Commissioner of Customs (Appeals) is directed to decide the petitioner's pending appeal against the order dated 27.08.2019 within three months from receipt of certified copy of this order.

Release of detained goods during pendency of appeal - equity and fair play - security for differential duty in lieu of bank guarantee or cash - detention memo - Permissibility and manner of release of goods detained by Customs during the pendency of the statutory appeal. - HELD THAT: - Although the Customs Act does not provide for release of detained goods as a matter of right during the pendency of appeals under Sections 128/129, the Court may exercise its Article 226 jurisdiction guided by principles of equity and fair play. Considering the perishable nature of the imported food supplements and the overall circumstances, the Court ordered release of the detained goods on furnishing of security for the remaining demand of differential duty, expressly permitting forms of security other than bank guarantee or cash to the satisfaction of the Proper Officer. To facilitate lawful release, the Proper Officer was also directed to issue the requisite detention memo. The Court required these steps to be completed within one week from receipt of the certified copy of the order. [Paras 5, 6]

Detained goods shall be released on furnishing security (other than bank guarantee or cash) to the satisfaction of the Proper Officer for the remaining demand; the Proper Officer shall issue the detention memo and the release shall be effected within one week of receipt of the certified copy of this order.

Final Conclusion: All three writ petitions are disposed of: the appellate authority is directed to decide the statutory appeal within three months, and the detained goods are to be released on specified security with issuance of a detention memo, compliance to be effected within the timelines ordered.

Admission of appeal and direction for expeditious hearing - dispensing with service and notice where respondent is represented - direction for filing of informal paper book and service on opposing counsel - disposal of stay application without affidavit and consequential non-admission of allegations

Admission of appeal and direction for expeditious hearing - Appeal admitted and directed to be heard expeditiously. - HELD THAT: - The Court entertained the appeal filed by the Commissioner of Customs (Port) against the single judge's judgment allowing the writ petition. Rather than deciding the substantive challenge to the impugned circular at this stage, the Court admitted the appeal and ordered that it be listed for expeditious hearing on a specified date. The Court also declined to grant any interim order that would have the effect of deciding the appeal at the interlocutory stage.

Appeal admitted and listed for expeditious hearing on the specified date; no interim order granted.

Dispensing with service and notice where respondent is represented - direction for filing of informal paper book and service on opposing counsel - Service and formal notice dispensed with because respondent is represented; appellant directed to file an informal paper book and serve it on respondent's advocate. - HELD THAT: - The Court exercised its administrative discretion to dispense with formal service and issuance of notice given that the respondent is represented by counsel. The appellant's advocate-on-record was instructed to file an informal paper book by a stipulated date and serve a copy upon the respondent's advocate-on-record at least seven days before the hearing. Other formalities were dispensed with to expedite the proceedings.

Formal service and notice dispensed with; appellant to file and serve an informal paper book within the directed timeline.

Disposal of stay application without affidavit and consequential non-admission of allegations - Stay application disposed of without calling for affidavit; allegations in the stay petition deemed not admitted by the respondent. - HELD THAT: - The stay application filed in connection with the appeal was disposed of by the Court without directing that any affidavit be filed. The Court recorded that, since no affidavit was called for, any allegations contained in the stay petition are to be treated as not admitted by the respondent. This indicates that the disposal did not rest on acceptance of the stay-petition allegations and preserves the parties' positions for the substantive hearing.

Stay application disposed of; allegations in the stay petition not deemed admitted by the respondent.

Final Conclusion: The High Court admitted the appeal against the single judge's order, directed an expedited listing, dispensed with formal service because the respondent is represented while mandating filing and service of an informal paper book, and disposed of the related stay application without calling for affidavit, holding that the stay-petition allegations are not admitted.

Applicability of the Limitation Act, 1963 to proceedings under the Insolvency and Bankruptcy Code - Retrospective effect of Section 238A of the Code - Article 137 (residuary article) as the applicable limitation provision - Trigger for limitation in winding up petitions - date of default - Distinctness of winding up proceedings (in rem) from suits for recovery - Effect of pending suit on limitation for winding up - suit does not revive or extend limitation - Bona fide dispute as a bar to winding up under Section 433(e) read with Section 434

Applicability of the Limitation Act, 1963 to proceedings under the Insolvency and Bankruptcy Code - Retrospective effect of Section 238A of the Code - Article 137 (residuary article) as the applicable limitation provision - Trigger for limitation in winding up petitions - date of default - Winding up petition transferred to the NCLT under the Code is time-barred and cannot be revived by transfer where limitation has already elapsed. - HELD THAT: - The Court held that with the insertion of Section 238A the Limitation Act applies to applications under the Code and, therefore, the residuary Article 137 governs the limitation for such applications. The determinative legal test for a winding up petition under Section 433(e) (read with Section 434) is the date of default (the date when the company is unable to pay its debts) which triggers the running of limitation. A petition filed beyond three years of that date is barred unless relief under Section 5 of the Limitation Act is shown. On the facts, IL&FS itself recorded the date of default as 19th August, 2012 (Form-1) and the winding up petition filed on 21st October, 2016 was therefore beyond three years. Section 238A cannot resurrect a claim that is already time-barred, and consequently the admission orders of the NCLT and dismissal of the appeal by the NCLAT were set aside. [Paras 10, 31]

Winding up petition filed on 21st October, 2016 is time-barred under Article 137 and is dismissed; NCLT and NCLAT orders are set aside.

Distinctness of winding up proceedings (in rem) from suits for recovery - Effect of pending suit on limitation for winding up - suit does not revive or extend limitation - Bona fide dispute as a bar to winding up under Section 433(e) read with Section 434 - The pendency of a suit for specific performance or recovery does not, by itself, keep a debt alive for the purpose of limitation applicable to a separate winding up proceeding. - HELD THAT: - The Court reviewed authority and reasoned that a suit for recovery and a winding up petition are distinct and independent remedies. Limitation runs from the date the right to sue accrues (date of default) and can be extended only by recognised modes in the Limitation Act (e.g., acknowledgement under Section 18). Mere pendency of a suit does not revive or extend the limitation period applicable to a winding up petition; nor does filing a suit obviate the need to show a subsisting debt or other permissible grounds to postpone limitation at the time the winding up petition is filed. Where a bona fide dispute exists, the deeming provision in Section 434(1)(a) does not operate to make the debt 'due' for winding up purposes. [Paras 19, 29]

The existence or pendency of the suit did not prevent the winding up petition from being time-barred; the suit does not revive or extend limitation for the winding up petition.

Final Conclusion: Civil Appeal allowed and Writ Petition disposed by holding the winding up petition (filed 21st October, 2016) barred by limitation under Article 137 of the Limitation Act; NCLT and NCLAT orders set aside; connected SLP and Transfer Petition disposed as infructuous.

Corporate Insolvency Resolution Process - operational debt - existence of dispute - undisputed debt - application under Section 9 of the IBC, 2016 - IBC not a recovery forum - documentary evidence of debt

Documentary evidence of debt - application under Section 9 of the IBC, 2016 - Sufficiency of the petitioner's documentary evidence to establish the principal debt claimed and maintainability of the Section 9 petition. - HELD THAT: - The Tribunal found discrepancies between the amounts stated in the bill, the demand notice and the petition, with the principal figure claimed in the petition not matching the admitted billed amount less advance. The petitioner produced only the bill dated 18.03.2016 and did not file supporting documents to reconcile the differing figures. The Tribunal applied the settled principle that an application under Section 9 must be supported by documentary evidence showing the debt to be due and payable and concluded that the petitioner failed to establish its claim on the materials filed. [Paras 6]

The petition is not maintainable for want of adequate documentary proof of the claimed debt; the claim is not established.

Operational debt - undisputed debt - existence of dispute - IBC not a recovery forum - Whether there existed an undisputed operational debt entitling initiation of CIRP under Section 9 in view of precedent that IBC is not a remedy for recovery. - HELD THAT: - Relying on Supreme Court authority that IBC cannot be used as a recovery forum and that existence of an undisputed operational debt is a sine qua non for initiation of CIRP, the Tribunal examined whether the conditions in the cited decisions were satisfied. Given the inconsistencies in claimed amounts, the absence of supporting documents, and the respondent's denial of the alleged due amount (including denial of interest liability), the Tribunal held that the requirement of an undisputed operational debt was not met and that there existed material for treating the claim as disputed. [Paras 7, 8]

Existence of an undisputed operational debt not established; application under Section 9 dismissed.

Final Conclusion: C.P.(IB) No.85/BB/2019 dismissed for failure to establish an undisputed operational debt and for inadequate documentary support; petitioner free to pursue other remedies under law.

Admission of Section 9 application under IBC - Insolvency Resolution Process versus individual recovery - Objective of the IBC: resolution and maximisation of value of assets - Protection of going concern and livelihood of employees - Effect of pre-application settlement offers and payments on maintainability

Admission of Section 9 application under IBC - Insolvency Resolution Process versus individual recovery - Effect of pre-application settlement offers and payments on maintainability - Protection of going concern and livelihood of employees - Objective of the IBC: resolution and maximisation of value of assets - Maintainability and admission of the application under Section 9 of the Insolvency and Bankruptcy Code, 2016 in the facts of the case. - HELD THAT: - The Tribunal found that substantial business dealings and cordial commercial relations existed between the parties, and the corporate debtor had made part payments and proffered a demand draft specifically offering Rs. 7,50,000 as full and final settlement which the applicant did not accept. Reliance was placed on the object of the IBC as being resolution and maximisation of value of the corporate debtor's assets rather than individual creditor recovery, and on authorities emphasising preservation of the corporate debtor as a going concern and the livelihood of employees. The Tribunal observed that allowing a Section 9 petition where the corporate debtor has sought to settle would amount to permitting individual recovery that could prejudice the corporate debtor's assets and defeat the statutory objective of resolution. Having regard to the settlement efforts, the impact on the going concern and the statutory aim of encouraging resolution over piecemeal recovery, the Tribunal concluded that the petition was not maintainable and should not be admitted. [Paras 7, 8, 9, 10, 11]

Company Petition No. CP (IB) 282 of 2019 dismissed; application under Section 9 not admitted.

Final Conclusion: The Section 9 application filed by the operational creditor was dismissed as the Tribunal found settlement efforts and part payments by the corporate debtor, and that initiating CIRP would be contrary to the IBC's object of preserving the corporate debtor as a going concern and avoiding piecemeal recovery.

Corporate Insolvency Resolution Process - Section 7 of the Insolvency and Bankruptcy Code, 2016 - default as trigger for insolvency - RBI circular declared ultra vires - adjudicating authority's duty to ascertain default from records - authorization of financial creditor to file - remand for admission and notice

RBI circular declared ultra vires - Section 7 of the Insolvency and Bankruptcy Code, 2016 - Validity of rejection of Section 7 application solely on the ground that the RBI circular dated 12.02.2018 had been held ultra vires - HELD THAT: - The Appellate Tribunal found on the record that the State Bank of India did not file the Section 7 application pursuant to the RBI circular. In absence of evidence that the application was filed only because of the circular, the Adjudicating Authority erred in holding the proceeding non-est on that ground. The Tribunal applied the settled principle that an adjudicating authority must decide a Section 7 petition on its own merits by ascertaining existence of default from the records, and cannot mechanically reject an application merely because a policy circular has been declared ultra vires where filing was independent of that circular. [Paras 5, 11, 13]

Rejection of the Section 7 application solely on account of the RBI circular being declared ultra vires was set aside.

Default as trigger for insolvency - adjudicating authority's duty to ascertain default from records - Existence of debt and default sufficient to invoke Section 7 and admit CIRP - HELD THAT: - The Tribunal relied on the material placed before the Adjudicating Authority, including the admission in the impugned order that the corporate debtor had committed default and owed the debt. Applying the principle in Innoventive Industries Ltd. v. ICICI Bank, the Tribunal held that where a financial debt is due and a default is established from records, the insolvency resolution process must be initiated. There was no contest on the existence of debt and default that could negate the application, and therefore the appellant had made out a case for initiation of CIRP. [Paras 2, 10]

The Appellant established debt and default sufficient to trigger initiation of Corporate Insolvency Resolution Process under Section 7.

Authorization of financial creditor to file - remand for admission and notice - Authority of the officer filing the application and consequent directions to the Adjudicating Authority - HELD THAT: - The objection that the application was not filed by an authorised person was considered and rejected by the Tribunal on the record, concluding that the application had been filed by an authorised officer of the bank. Having set aside the Adjudicating Authority's order, the Tribunal remitted the matter to the Adjudicating Authority with a direction to admit the Section 7 application after issuing notice to the corporate debtor so that the debtor may endeavour to settle the claim prior to admission. The remand is for admission and consequential proceedings in accordance with law. [Paras 12, 13]

Objection as to want of authorization rejected; matter remitted to the Adjudicating Authority with direction to admit the application and issue notice to the corporate debtor.

Final Conclusion: The appeal is allowed: the impugned order is set aside; the Section 7 petition is held to be maintainable on the basis of established debt and default and the absence of any demonstrable reliance on the RBI circular; the Adjudicating Authority is directed to admit the application after notice to the corporate debtor to enable settlement, and the matter is remitted for that purpose. No costs.

Resolution plan failure and extension of insolvency timeline - Application of the third proviso to the Amendment Act, 2019 - Power of the Resolution Professional to invite fresh offers - Role and finality of the Committee of Creditors in approving resolution

Power of the Resolution Professional to invite fresh offers - Time-limit for inviting offers under the amended timeline - Resolution Professional permitted to invite fresh offers within a reduced 21-day period and to take immediate steps for invitation. - HELD THAT: - The Court, having heard submissions and noting the elapsed time under the insolvency timeline, authorised a further opportunity to procure a viable resolution. In view of the limited period available pursuant to the Amendment Act's temporal operation, the parties agreed that the Resolution Professional should be permitted to invite fresh offers and, by consent, a 21-day window (instead of the standard 30 days) was fixed for submission of offers. The Court directed that steps for inviting fresh offers be initiated forthwith and specified a deadline for commencement of those steps.

Resolution Professional permitted to invite fresh offers within 21 days and directed to commence invitation by 25.09.2019.

Role and finality of the Committee of Creditors in approving resolution - Resolution plan failure and extension of insolvency timeline - Committee of Creditors to consider offers received and take a final decision within two weeks of invitation; the decision to be placed before the Court for consideration. - HELD THAT: - While the Court did not finally determine the legal questions arising from the alleged failure of the earlier resolution or the applicability of this Court's precedent, the parties agreed that one further attempt should be made. The Resolution Professional was ordered to invite fresh offers; thereafter the Committee of Creditors was given a two-week period to take a final call on the offers. The Committee's decision and the offers received must be placed before the Court on the next date of hearing for the Court's consideration. This effectively remands the factual determination and final decision on the resolution plan to the Committee with judicial oversight on the outcome.

Committee of Creditors to take a final decision within two weeks after invitation of offers and place the decision and offers before the Court on the next date of hearing.

Final Conclusion: By consent the Court permitted a final opportunity for resolution by authorising the Resolution Professional to invite fresh offers within 21 days (steps to commence by 25.09.2019) and directed the Committee of Creditors to take a final call within two weeks and place the matter before the Court; substantive questions regarding the earlier plan's failure and the Amendment Act's proviso were not finally decided.

Voluntary liquidation - dissolution of corporate person - liquidator's duty to preserve records - distribution to contributories - compliance with IBBI (Voluntary Liquidation Process) Regulations, 2017 - Section 59(7) and Section 59(8) of the Insolvency and Bankruptcy Code, 2016 - no pending claims or proceedings

Voluntary liquidation - dissolution of corporate person - Section 59(7) and Section 59(8) of the Insolvency and Bankruptcy Code, 2016 - Order dissolving M/s. Sun Asset Reconstruction India Private Limited upon completion of voluntary liquidation. - HELD THAT: - The Tribunal found that the company had been placed into voluntary liquidation by a Special Resolution passed on 31st March, 2018 and that the liquidation process was carried out in accordance with the Code and the relevant IBBI Regulations. The liquidator submitted the preliminary and final reports, opened and closed a liquidation bank account, realized assets, met expenses and taxes, and distributed the realized proceeds to the contributories. The Income Tax authority recorded no outstanding demand and no pending proceedings. On the material placed before it and the final report, the Tribunal was satisfied that the affairs of the company were completely wound up and its assets completely liquidated, and therefore exercised its power under Sub section (8) of Section 59 to dissolve the corporate person. [Paras 12, 13, 14]

M/s. Sun Asset Reconstruction India Private Limited is dissolved with effect from the date of the Order.

Liquidator's duty to preserve records - compliance with IBBI (Voluntary Liquidation Process) Regulations, 2017 - Direction that the liquidator preserve reports, registers and books of account for eight years after dissolution. - HELD THAT: - Having accepted the final report and found the liquidation complete, the Tribunal directed that the liquidator preserve either physical or electronic copies of the reports, registers and books of account referred to in the IBBI (Voluntary Liquidation Process) Regulations, 2017 for at least eight years after dissolution. The directive implements the preservation obligation contemplated by the Regulations and ensures availability of records post dissolution for statutory or administrative purposes. [Paras 14]

The liquidator is directed to preserve the specified records for eight years after dissolution, either with himself or with an information utility.

Distribution to contributories - no pending claims or proceedings - Relief of the liquidator following completion of liquidation and distribution to contributories. - HELD THAT: - The Tribunal recorded that the liquidator had realized the company's assets, met liabilities, distributed the proceeds to contributories, and that no claims, dues or litigation remained pending. On that basis, and upon receipt of the final report and statutory compliances, the Tribunal relieved the liquidator of his functions consequent to the order of dissolution. [Paras 11, 14, 15]

The liquidator stands relieved consequent to the dissolution order.

Final Conclusion: The Tribunal dissolved M/s. Sun Asset Reconstruction India Private Limited under Section 59(8) of the IBC upon satisfaction with the voluntary liquidation proceedings, directed preservation of statutory records for eight years, and relieved the liquidator; the Registry was directed to forward the order to the Registrar of Companies.

Liquidation under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 - Appointment of Liquidator by the Adjudicating Authority - Effect of liquidation on moratorium - Vesting of management powers in the Liquidator - Authority of the Liquidator to institute proceedings on behalf of the corporate debtor - Public announcement and notice of discharge to employees - Liquidator's fees governed by Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016

Liquidation under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 - Order for liquidation of the corporate debtor M/s. RLS Alloys Private Limited was to be passed. - HELD THAT: - The Committee of Creditors, being the sole financial creditor with 100% voting share, unanimously resolved in its 4th meeting to initiate liquidation. No resolution plan was received within the maximum CIRP period of 180 days. The Resolution Professional placed the CoC recommendation and the factual matrix before the Adjudicating Authority, including the dilapidated condition of machinery and absence of promoter management, which led the Authority to conclude that revival was not feasible and to exercise the power under Clause (a) of Sub-Section (1) of Section 33 of the I&B Code, 2016 to order liquidation. [Paras 8, 9, 10]

Liquidation of M/s. RLS Alloys Private Limited ordered.

Appointment of Liquidator by the Adjudicating Authority - The Resolution Professional, Mr. Ramasamy Shanmuggam, was to be appointed as Company Liquidator. - HELD THAT: - The CoC had expressly appointed and approved the Resolution Professional as Liquidator by 100% voting. Exercising powers under Section 33, the Authority appointed the same person as the Company Liquidator and directed him to make the statutory public announcement and perform duties attendant to liquidation. [Paras 7, 9]

Mr. Ramasamy Shanmuggam appointed as Company Liquidator.

Effect of liquidation on moratorium - Vesting of management powers in the Liquidator - The moratorium under Section 14 ceases from the date of liquidation and all powers of directors and KMP vest in the Liquidator. - HELD THAT: - The Authority recorded that upon passing the liquidation order the previously declared moratorium shall cease to have effect and that all powers of the Board of Directors, Key Managerial Personnel and partners shall cease and be vested in the appointed Liquidator, who will manage the affairs of the corporate debtor during liquidation. [Paras 9]

Moratorium ceases and management powers vest in the Liquidator.

Authority of the Liquidator to institute proceedings on behalf of the corporate debtor - No suit or proceeding shall be instituted by or against the corporate debtor except as provided; the Liquidator may institute proceedings with prior approval of the Adjudicating Authority. - HELD THAT: - The order clarified that, subject to Section 52, suits or other legal proceedings by or against the corporate debtor are barred, but the Liquidator is permitted to institute proceedings on behalf of the corporate debtor only with prior approval of the Adjudicating Authority. The order further carved out exceptions for transactions notified by the Central Government in consultation with financial sector regulators. [Paras 9]

Restriction on suits; Liquidator may institute proceedings with prior approval of the Authority; statutory exceptions preserved.

Public announcement and notice of discharge to employees - Liquidator's fees governed by Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 - The Liquidator shall make a public announcement, the order shall operate as notice of discharge to employees, and the Liquidator's fees shall be in accordance with the Regulations. - HELD THAT: - The Authority directed the Liquidator to issue the statutory public announcement that the corporate debtor is in liquidation and held that the order shall be deemed a notice of discharge to officers, employees and workmen except where business is continued during liquidation. The Liquidator is entitled to charge fees in the proportion and manner specified under Regulation 4 of the Liquidation Process Regulations, 2016. [Paras 9]

Liquidator to issue public announcement; order to serve as notice of discharge; Liquidator's fees to follow Regulation 4.

Final Conclusion: The Adjudicating Authority allowed MA/559/2019 in CP/661/IB/2017 and ordered liquidation of M/s. RLS Alloys Private Limited, appointed the Resolution Professional as Company Liquidator, directed cessation of the moratorium and vesting of management powers in the Liquidator, prescribed the limitations and permissions regarding legal proceedings, required the public announcement and notice of discharge, and confirmed that the Liquidator's fees shall be as per the relevant Regulations.

Provisional attachment - first proviso of Section 5(1) of the PMLA - possession under Section 8(4) read with Rule 5(1) of the 2013 Rules - proceeds of crime - predicate/scheduled offence requirement - finality of income tax assessment - Section 23 rebuttable presumption

Possession under Section 8(4) read with Rule 5(1) of the 2013 Rules - provisional attachment - Lawfulness of the Enforcement Directorate's taking of physical possession of the attached immovable property - HELD THAT: - The Tribunal found that after confirmation of a provisional attachment order the Director (or authorised officer) may take possession but must do so in the manner prescribed. Rule 5(1)-(2) mandates issuance of a notice to the Registrar and, where the property is occupied by the owner, a ten day eviction notice before forcible eviction and taking of possession with assistance of local authorities. In the present case possession was taken before the eviction notice period had run and the notice of possession was served only after possession was taken. The action of taking complete physical possession (100%) contrary to the procedure in Rule 5 and the statutory prescription was held to be arbitrary and contrary to mandatory provisions of the Act and Rules. On that basis the Tribunal directed immediate restoration of possession to the appellants. [Paras 21, 22]

Possession taken by the respondent is contrary to mandatory provisions and is restored to the appellants forthwith.

First proviso of Section 5(1) of the PMLA - predicate/scheduled offence requirement - proceeds of crime - finality of income tax assessment - Section 23 rebuttable presumption - Validity of the provisional attachment confirmed by the Adjudicating Authority under the first proviso to Section 5(1) of the PMLA and related merits - HELD THAT: - The Tribunal examined whether the preconditions for attachment under the first proviso to Section 5(1) were satisfied. The respondent admitted that the appellants were neither named in the FIR/ECIR nor charge sheeted and that no report under Section 173 CrPC or complaint by an authorised investigating agency had been made against the appellants. The Tribunal emphasised that the first proviso limits attachment under Section 5(1) to situations where a report/complaint has been forwarded or filed in respect of the scheduled offence; absent such predicate/scheduled offence proceedings, the substratum for 'proceeds of crime' does not exist. The Tribunal also noted that the Income tax assessment for the relevant transactions attained finality with a finding of genuineness and that the respondent had not invoked or relied upon Section 23 presumptions before the Adjudicating Authority. On merits, having found the reason to believe for attachment unsustainable in light of absence of scheduled offence proceedings and the final IT assessment, the Tribunal held that the provisional attachment as confirmed could not be sustained and quashed the attachment subject to a conditional deposit to meet the limited allegation. [Paras 9, 25, 31, 45, 46]

Provisional attachment confirmed by the Adjudicating Authority is quashed; appellants to deposit the alleged proceeds sum within two months (with liberty to move for modification on proof of genuineness).

Final Conclusion: The appeal is partly allowed: the respondent's physical possession of the property is set aside and restored to the appellants for breach of the prescribed procedure; the confirmed provisional attachment is quashed on merits for failure to satisfy the first proviso of Section 5(1) and related requirements, subject to the conditional deposit ordered by the Tribunal.

Composite indivisible works contract - Taxability of works contracts prior to 01.06.2007 - Valuation of taxable services and Rule 5 - Prospective effect of amendment to Section 67 (inclusion of reimbursable expenses) - Mutual exclusivity of Centre and State taxation

Composite indivisible works contract - Taxability of works contracts prior to 01.06.2007 - Mutual exclusivity of Centre and State taxation - The contract with Power Grid is a composite indivisible works contract and is not chargeable to service tax for the period prior to 01.06.2007. - HELD THAT: - The Tribunal examined the contract documents, Letter of Award and BOQ and found that a substantial portion of the contract consideration related to earthwork (supply and filling with borrowed earth) and that the contract was treated as a works contract for Kerala VAT purposes. Applying the principles in Larsen & Toubro and the line of authority cited (including Gannon Dunkerley), the Tribunal held that a composite indivisible works contract must be treated as a works contract and that Parliament could only tax the service element while the State taxes the transfer of property in goods. In consequence, the Tribunal concluded that no service tax could be levied on the appellant in respect of the period before 01.06.2007 and that receipt of payments after March/April 2007 does not alter the taxable event, which is the date of provision of service. [Paras 5]

Demand of service tax in respect of the contract for the period prior to 01.06.2007 is set aside; the contract is to be treated as a works contract not chargeable to service tax for that period.

Valuation of taxable services and Rule 5 - Prospective effect of amendment to Section 67 (inclusion of reimbursable expenses) - Valuation of services by applying Rule 5 to include reimbursable expenses was incorrect and Rule 5 went beyond the mandate of Section 67 as then in force. - HELD THAT: - Relying on the Supreme Court's decision in Intercontinental, the Tribunal held that Rule 5, which sought to include reimbursable expenses within the 'gross amount charged' for valuation, exceeded the remit of Section 67 (as it stood prior to statutory amendment) because valuation must be limited to the consideration for the taxable service itself. The Tribunal noted that the Legislature only made reimbursable expenses part of valuation prospectively by the 2015 amendment to Section 67, and that such a change is not retrospective. Consequently, the valuation adopted by the Commissioner under Rule 5 was found to be incorrect for the period in issue. [Paras 5]

Valuation of the taxable service in terms of Rule 5 is not sustainable for the period in dispute; reimbursable expenses could not be included prior to the statutory amendment.

Final Conclusion: The appeal is allowed: the service tax demand in respect of the works contract for the period before 01.06.2007 is set aside and the valuation adopted under Rule 5 is held incorrect for the period in dispute; consequential relief, if any, to follow.

Summary order. Appeal admitted on two substantial questions of law; notice to respondent to be issued and served by 30th September, 2019; appellant to file an informal paper book by 22nd November, 2019 and serve a copy on respondent seven days before hearing; appeal listed for hearing on 4th December, 2019; stay application disposed of.

Summary order. Appeal directed to cure defect in court fee within four weeks, failing which the appeal shall stand dismissed for non-prosecution.

Service tax payable on amount received and not receivable - Deemed receipt directive of the Central Government - Question of fact - Adjudicatory discretion not to interfere

Service tax payable on amount received and not receivable - Deemed receipt directive of the Central Government - Question of fact - Adjudicatory discretion not to interfere - The finding of the adjudicating authorities that service tax is payable only on amounts actually received and not on amounts merely receivable was upheld and the appellate court declined to interfere. - HELD THAT: - The respondent transported oil by pipeline and, under a Central Government directive, was deemed to have received 76% of the consideration and had paid service tax on that portion. The remaining 23% was payable by the Haldia refinery (an internal unit) but was not paid to the respondent, who therefore did not remit service tax on that balance. The respondent's contention that service tax is payable only on amounts actually received (and not on amounts merely receivable) was accepted by the lower adjudicatory authorities. The High Court regarded the matter as presenting a question of fact and found no reason to interfere with the exercise of discretion by those authorities; accordingly the appellate intervention under the relevant provision was refused.

The appellate challenge was dismissed and the lower authorities' conclusion was maintained.

Final Conclusion: The High Court dismissed the appeal, affirming the lower authorities' factual finding that service tax liability arose only on amounts actually received and refusing to interfere with their discretion.

Refund of CENVAT credit under Rule 5 of CCR, 2004 - prohibition on refund where drawback has been availed - drawback components - customs portion and central excise portion - interpretation of single-rate drawback as pertaining solely to customs duty - tribunal's power to grant stay of recovery of pre-deposit

Refund of CENVAT credit under Rule 5 of CCR, 2004 - prohibition on refund where drawback has been availed - drawback components - customs portion and central excise portion - interpretation of single-rate drawback as pertaining solely to customs duty - Respondents entitled to refund of Cenvat credit under Rule 5 of CCR, 2004 notwithstanding that they availed drawback which, under the Drawback Schedule and Notification 110/2015-CUS, represented only the customs component. - HELD THAT: - The proviso to Rule 5 bars refund only where drawback has been availed "in respect of such duty"; in context that expression refers to the excise duty for which Cenvat credit is available. The drawback scheme distinguishes customs and central excise portions; Notification 110/2015-CUS para 7 clarifies that where a single rate appears in the schedule it pertains solely to the customs component and is available irrespective of availing Cenvat. Since there was only a single rate for the exported goods, the schedule does not provide for any central excise component and therefore the respondents could not have availed drawback in respect of central excise duty. Because no central excise drawback was availed, the statutory prohibition in the proviso to Rule 5 does not apply and refund of Cenvat credit is permissible under Rule 5.

Impugned appellate orders allowing refund under Rule 5 are correct and are upheld.

Tribunal's power to grant stay of recovery of pre-deposit - stay of recovery of pre-deposit - Stay applications filed by the department seeking to stay operation of the impugned orders and withhold refunds are not maintainable. - HELD THAT: - The Tribunal's stay jurisdiction is confined to staying recovery of pre-deposit where demand is confirmed, and that power is further circumscribed by statutory fixation of pre-deposit amounts. The department's stay applications sought withholding of refunds and operation of the impugned orders; given the restricted scope of the Tribunal's stay powers, the applications could not be entertained.

All three stay applications are dismissed as not maintainable.

Final Conclusion: The impugned orders of the first appellate authority allowing refund of Cenvat credit are upheld; the revenue appeals are dismissed and the stay applications are dismissed as not maintainable, with consequential relief to the respondents if any.

Mandatory pre-deposit for entertaining appeals - amendment of Section 35F and its temporal application - peremptory "shall not" bar on appellate jurisdiction - doctrine of merger - binding effect of Supreme Court decisions under Article 141 - exercise of writ jurisdiction under Article 226

Mandatory pre-deposit for entertaining appeals - amendment of Section 35F and its temporal application - peremptory "shall not" bar on appellate jurisdiction - Amended Section 35F applies to all appeals filed on or after 6th August, 2014 and mandates the specified pre-deposit as a condition for entertaining such appeals. - HELD THAT: - The Court held that the substituted provision operates on appeals filed on or after its commencement and the statutory language - including the peremptory expression "shall not" - imposes an absolute bar on appellate authorities entertaining appeals unless the prescribed percentage is deposited. Earlier decisions construing the date of filing of the appeal as the relevant date were followed. The Division Bench decision in Anjani Technoplast Ltd., upheld by the Supreme Court, binds this Court and confirms that appeals filed on or after 6th August, 2014 fall within the amended provision and cannot be entertained without the mandatory pre-deposit. Permitting a CESTAT to hear an appeal filed after that date without the deposit would require the appellate authority to act contrary to the statutory command and frustrate the legislature's mandate. [Paras 6, 10, 18, 19, 20]

The petitioner's contention that pre-deposit is not required because the show cause notice or dispute arose before 6th August, 2014 is rejected; the amended Section 35F applies to appeals filed on or after 6th August, 2014 and the mandatory pre-deposit must be made.

Exercise of writ jurisdiction under Article 226 - doctrine of merger - binding effect of Supreme Court decisions under Article 141 - The High Court cannot, in exercise of its writ jurisdiction under Article 226, direct the appellate authority to disregard the statutory pre-deposit requirement or grant relief contrary to the law as settled by binding precedent. - HELD THAT: - Having regard to the merger of the Division Bench judgment in Anjani Technoplast with the dismissal of the Civil Appeal by the Supreme Court, the ratio is binding under Article 141. Consequently, this Court is precluded from adopting a contrary course and from directing the CESTAT to entertain an appeal without the statutory pre-deposit. Established principles disallow courts from directing authorities to act in violation of settled law; earlier decisions permitting relief by partial or whole waiver cannot be followed in face of the binding precedent. The petitioner's reliance on equitable or inherent powers under Article 226 cannot override the clear statutory command and the binding judicial precedents. [Paras 15, 16, 17, 21, 22]

The Court refuses to exercise writ jurisdiction to waive or relax the mandatory pre-deposit requirement; the writ petition is dismissed.

Final Conclusion: The writ petition is dismissed: the amended Section 35F applies to appeals filed on or after 6th August, 2014 requiring mandatory pre-deposit, and the High Court will not direct the appellate authority to disregard that statutory requirement in view of binding precedent.

Cenvat credit where final product cleared on payment of duty - Denial of Cenvat credit on ground that activity is not manufacture - Requirement of affirmative and tangible evidence to establish clandestine removal - Burden on revenue to prove clandestine removal by production of corroborative evidence - Use of input fuel (furnace oil) despite availability of alternate fuel (CNG) and burden to rebut - Limitation under proviso to Section 11A of the Central Excise Act

Cenvat credit where final product cleared on payment of duty - Denial of Cenvat credit on ground that activity is not manufacture - Cenvat credit denied on the ground that the activity did not amount to manufacture - HELD THAT: - The Tribunal held that where the final product is cleared on payment of duty, the assessee cannot be denied Cenvat credit merely on the basis that the activity does not fall within the definition of manufacture. The Tribunal relied on the majority decision in Asian Color Coated Ispat Ltd. (reported in the judgment) to conclude that the denial of credit on that ground was not justified. Consequently the confirmation of demand on this basis was set aside. [Paras 4]

Denial of Cenvat credit on the ground of non-manufacture set aside; credit cannot be denied when final product is cleared on payment of duty.

Requirement of affirmative and tangible evidence to establish clandestine removal - Burden on revenue to prove clandestine removal by production of corroborative evidence - Confirmation of demand for alleged clandestine removal based on classification and sale of scrap - HELD THAT: - The Tribunal found that the large demand confirmed by the adjudicating authority rested solely on the application of a higher duty rate to scrap sold by the assessee and on an inference that only stainless steel final product was manufactured. The revenue failed to produce procurement records, evidence of manufacture and clearance to identified buyers, transport documentation or receipt of consideration. In absence of sufficient, affirmative and tangible evidence - for which the onus lies on the revenue - the finding of clandestine removal could not be sustained. The impugned finding and demand were accordingly set aside. [Paras 5]

Demand for clandestine removal set aside for lack of affirmative and corroborative evidence.

Use of input fuel (furnace oil) despite availability of alternate fuel (CNG) and burden to rebut - Denial of Cenvat credit in respect of furnace oil on the ground that CNG pipeline existed so furnace oil was not required - HELD THAT: - The Tribunal accepted the assessee's explanation that furnace oil was used for heat treatment and preheating furnaces. The revenue did not rebut this explanation by producing any evidence to the contrary. In absence of evidence disproving the claimed use of furnace oil, the denial of credit on this ground was held unsustainable. [Paras 6]

Denial of Cenvat credit for furnace oil set aside; revenue failed to rebut assessee's explanation.

Limitation under proviso to Section 11A of the Central Excise Act - Whether the show cause notice issued on 19.02.2015 was barred by limitation having regard to the audit of 23-26 August 2013 - HELD THAT: - The Tribunal observed that the show cause notice was issued well after the normal period of limitation and relied on the Allahabad High Court decision in Commissioner of Central Excise and Service Tax Vs Triveni Engineering Industries Ltd. (referred to in the judgment) which holds that a notice issued after 22 months from the audit is barred by the proviso to Section 11A. Applying that principle, the Tribunal held the notice to be time-barred. [Paras 7]

Show cause notice held to be barred by limitation; proceedings unsustainable on limitation ground.

Final Conclusion: The impugned order is set aside and the appeal is allowed: the denial of Cenvat credit on non-manufacture grounds, the demand for clandestine removal, and the denial of credit for furnace oil are quashed on merits; additionally the show cause notice is time barred under the proviso to Section 11A, entitling the appellant to consequential relief.

Restoration of appeal for non-prosecution - Rule 20 of the CESTAT Procedure Rules, 1982 - Cenvat credit - interest on reversed Cenvat credit - penalty for wrongful credit - distribution of Cenvat credit by head office

Cenvat credit - interest on reversed Cenvat credit - Whether the demand of interest for the intervening period could be sustained after the appellant had already reversed the Cenvat credit - HELD THAT: - The Tribunal recalled its earlier dismissal for non-prosecution under Rule 20 and restored the appeal. On the merits of the financial demand, the record showed that the appellant maintained sufficient balance in the Cenvat credit account during the intervening period. Relying upon the precedent cited by the Court, the Tribunal held that where sufficient credit balance existed and the credit had in any event been reversed by the appellant, the demand for interest for the intervening period could not be sustained. The Tribunal therefore concluded that the appellant was not liable to pay interest for the intervening period.

Demand of interest for the intervening period is set aside; appellant not liable to pay such interest.

Penalty for wrongful credit - distribution of Cenvat credit by head office - Whether penalty could be imposed on the appellant for taking Cenvat credit where the appellant contended a bonafide understanding that the head office was entitled to distribute Cenvat credit - HELD THAT: - The Tribunal accepted the appellant's case that, given the head office was located in Bombay and there was a bonafide understanding that Cenvat credit could be distributed by the head office to the unit in Jammu & Kashmir, imposition of penalty was not justified. In view of that legitimate belief and the reversal of the credit, the Tribunal held that the conditions for imposing penalty were not satisfied and the penalty could not be sustained.

Penalty imposed on the appellant set aside; penalty held not imposable.

Final Conclusion: The Tribunal recalled its earlier non-prosecution dismissal under Rule 20, restored the appeal, and on merits set aside the demand of interest for the intervening period and the penalty, disposing of the appeal in favour of the appellant.

Penalty for failure to deposit tax within time under the U.P. Trade Tax Act - reasonable cause for delay in depositing tax - absence of intention to evade tax / mens rea - obligation to record specific finding before imposing penalty - refund of wrongly levied penalty

Penalty for failure to deposit tax within time under the U.P. Trade Tax Act - reasonable cause for delay in depositing tax - absence of intention to evade tax / mens rea - Whether the penalty under Section 15-A(1)(a) could be sustained where the dealer deposited entry tax with delay and pleaded financial difficulty and other expenditures as cause for delay. - HELD THAT: - Section 15-A(1)(a) permits imposition of penalty only where the authority is satisfied that the dealer has, without reasonable cause, failed to deposit the tax within time. The Tribunal recorded that the revisionist pleaded financial crisis, payment obligations to cane growers and heavy expenditure on new machinery as reasons for delay, but failed to determine whether those circumstances amounted to a "reasonable cause". The High Court found no intention on the part of the revisionist to evade tax and accepted the explanations of financial difficulty and statutory liabilities as constituting a reasonable cause for delayed deposit. Because the determinative finding as to absence of reasonable cause was not returned by the Tribunal and the material supported the revisionist's explanation, the imposition of penalty could not be sustained. The Court therefore set aside the Tribunal's order upholding penalty and directed refund of the penalty amount deposited pursuant to the earlier order.

Penalty under Section 15-A(1)(a) set aside as the delay was shown to have reasonable cause and there was no intention to evade tax; refund of penalty directed.

Final Conclusion: Revision allowed; the Tribunal's order upholding penalty is set aside on the ground that the revisionist demonstrated reasonable cause for delayed deposit and no intention to evade tax, and the respondents are directed to refund the penalty amount deposited pursuant to this Court's order.

Attachment of bank accounts for recovery of tax demand - mandamus to de-freeze/de-seal bank accounts - interim stay of attachment pending adjudication - acceptance of surety bond in lieu of attachment

Mandamus to de-freeze/de-seal bank accounts - attachment of bank accounts for recovery of tax demand - interim stay of attachment pending adjudication - acceptance of surety bond in lieu of attachment - Whether the writ petition seeking mandamus to de-freeze the petitioner's bank accounts and interim stay of the attachment memo remained maintainable after the authority issued a memo directing release of the accounts on acceptance of surety bonds. - HELD THAT: - The petition challenged the attachment memo dated 11.04.2019 and sought an interim order to de-freeze the bank accounts pending adjudication before the Tribunal. At the resumed hearing the State produced a subsequent memo dated 09.08.2019 directing release of the petitioner's bank account following acceptance of surety bonds for the demand created for Assessment Years 2012-13 and 2013-14. In view of the respondents' action to release the accounts and the petitioner's counsel's agreement that nothing more survives, the Court concluded that the relief sought in the writ petition had been rendered infructuous and no live controversy remained for adjudication. [Paras 5, 6]

Petition disposed of as infructuous because the authority directed release of the attached bank account after accepting surety bonds; no further relief remains to be adjudicated.

Final Conclusion: The writ petition seeking de-freezing of the petitioner's bank accounts and interim stay of the attachment was held to be infructuous and disposed of after the assessing authority issued a memo directing release of the accounts upon acceptance of surety bonds for the demands relating to Assessment Years 2012-13 and 2013-14.

Summary order. Appeal dismissed as withdrawn with liberty to file a writ petition challenging the vires of Section 33 of the HVAT Act, 2003.

Principles of natural justice - opportunity of personal hearing - remand for fresh consideration - reconsideration on merits - judicial restraint in directing outcome - stay on reliance upon prior hearing

Principles of natural justice - opportunity of personal hearing - remand for fresh consideration - Validity of revised assessments finalised without affording the appellant a personal hearing - HELD THAT: - The Single Judge found that the revised assessments were finalised after the appellant filed objections but without affording a personal hearing, resulting in breach of the principles of natural justice; that finding was upheld. The matter was remitted to the Assessing Authority for reconsideration after affording the appellant a personal hearing, leaving open all substantive contentions raised by the appellant for determination by the authority and on appeal as may be available. [Paras 2, 3]

Impugned assessments set aside for want of personal hearing and remitted to the Assessing Authority for fresh consideration after affording personal hearing.

Reconsideration on merits - judicial restraint in directing outcome - Whether this Court should decide the merits of the assessments instead of remitting the matter to the Assessing Authority - HELD THAT: - The Court held that questions whether any assessment is to be made are primarily for the Assessing Authority to decide after hearing the appellant and considering objections and documents. The High Court will not entertain adjudication on the merits in place of the statutory authority where an effective statutory remedy of appeal is available; the Single Judge's order remanding for hearing does not foreclose the appellant's rights to raise merits before the appellate forum. [Paras 3, 4]

No interference with the Single Judge's remand; merits to be decided afresh by the Assessing Authority with subsequent statutory remedies available.

Stay on reliance upon prior hearing - opportunity of personal hearing - Appropriate procedural steps following remand where the appellant had already attended a prior hearing directed by the Single Judge - HELD THAT: - Although the appellant appeared on the date fixed by the Single Judge, the Court considered it appropriate to grant a further opportunity of hearing. The Assessing Authority was restrained from passing any orders based on the hearing conducted earlier and directed to post further hearing at the earliest with due intimation to the appellant and thereafter pass appropriate orders based on that further hearing. [Paras 5]

Assessing Authority restrained from acting on the earlier hearing; further hearing to be scheduled and assessment to be decided thereafter.

Final Conclusion: The Division Bench affirmed the Single Judge's setting aside of the revised assessments for want of personal hearing, remitted the matters to the Assessing Authority to decide afresh after affording personal hearing, clarified that no positive direction to re-open or predetermine the outcome was intended, and restrained the authority from relying on the earlier hearing held on 21.08.2019, directing a fresh hearing and appropriate orders thereafter.

Extension of limitation for reopening assessments under the Kerala VAT and KGST regime - availability and adequacy of alternative statutory remedy by way of statutory appeal - validity of service of subsequent notices issued before finalisation of assessment - acceptance of time-barred appeals as timely by appellate authority when permitted by court

Availability and adequacy of alternative statutory remedy by way of statutory appeal - acceptance of time-barred appeals as timely by appellate authority when permitted by court - Whether the appellant may be directed to raise the substantive challenges to Exts.P10 and P11 before the Appellate Authority and have time-barred appeals treated as filed within time. - HELD THAT: - The Court held that the existence of an effective alternate remedy of statutory appeal militates against entertaining the substantive challenge in writ jurisdiction at this stage. The appellant was, however, permitted to invoke the statutory remedy: if properly constituted appeals against Exts.P10 and P11 are filed before the appropriate Appellate Authority within three weeks from receipt of certified copy of the judgment, those appeals shall be accepted as if filed within the prescribed time. The appellant was also left free to seek interim relief from the Appellate Authority. This direction implements the principle that where an efficacious alternative remedy exists, the appropriate forum is the statutory appellate authority, subject to the Court's limited supervisory power to permit condonation of delay and to ensure the appeals are entertained. [Paras 4, 5]

Appeals against Exts.P10 and P11 may be filed within three weeks and shall be accepted by the Appellate Authority as if filed within time; interim relief may be sought; appeals to be adjudicated by the Appellate Authority.

Extension of limitation for reopening assessments under the Kerala VAT and KGST regime - validity of service of subsequent notices issued before finalisation of assessment - Whether the correctness of Exts.P10 and P11 on grounds such as issuance of notices and timeliness of reopening is to be adjudicated by this Court or left to the Appellate Authority for determination. - HELD THAT: - The Court did not decide the substantive questions on whether issuance of notices suffices to overcome the limitation period or whether subsequent notices served before finalisation of assessment are valid. Instead, having regard to the availability of the statutory appeal and the appellant's willingness to agitate those contentions before the Appellate Authority, the Court refrained from adjudicating these merits and directed that the Appellate Authority determine the questions afresh. The appeals are to be disposed of without being influenced by the findings in the Single Judge's order. [Paras 3, 5]

Substantive issues concerning the validity and timeliness of Exts.P10 and P11 are not decided by this Court and are remitted to the Appellate Authority for fresh adjudication; the Appellate Authority shall decide them uninfluenced by the impugned judgment.

Final Conclusion: The writ appeal is allowed in part by modifying the Single Judge's order: the appellant is permitted to file appeals against Exts.P10 and P11 within three weeks and such appeals shall be treated as time barred appeals filed within the statutory period; substantive challenges to those orders are left to the Appellate Authority to decide afresh, and interim relief may be sought there.

Sale Price - Explanation II to the definition of Sale Price - consideration passing from the purchaser - reading contract as a whole - distinction between excise duty and sales tax (VAT) - agreement made to evade taxes void

Sale Price - Explanation II to the definition of Sale Price - consideration passing from the purchaser - reading contract as a whole - distinction between excise duty and sales tax (VAT) - agreement made to evade taxes void - Facility charge recovered by the petitioner is includible in the 'Sale Price' under the JVAT Act, 2005 and is exigible to value added tax for the assessment years 2008-09 and 2009-10. - HELD THAT: - The Court examined the agreements and held that the facility charge is an amount paid by the purchaser to the dealer in relation to the sale of gases because the plant, pipelines and meters (for provision, transportation and measurement) are integral to making the goods available and completing the sale. Explanation II to the definition of 'Sale Price' includes any amount charged by the dealer for anything done in respect of the goods at or before delivery; therefore the facility charge, being for provision, operation and maintenance of plant, pipelines and meters used in relation to the gases, falls within 'Sale Price'. The agreements must be read as a whole and not clause by clause; clauses linking variation of the facility charge to WPI and clauses linking gas price to power cost indicate inter-dependency between facility charge and gas price. The fact that facility charge is sometimes billed separately while other customers are charged a composite higher gas price demonstrates that the facility charge represents a part of the consideration for sale. The Court distinguished precedents on excise (where value for manufacture is concerned) from sales tax principles and relied on binding authorities which apply the test of what consideration the purchaser pays for the goods; agreements intended to evade taxes are void and cannot be relied upon to exclude such consideration. In view of these determinative findings and applicable precedents, the Tribunal's confirmation of taxability was upheld. [Paras 30, 35, 36, 38, 43]

Facility charge is part of the 'Sale Price' under Section 2(xlviii) of the JVAT Act, 2005 (including Explanation II) and is subject to VAT for AY 2008-09 and AY 2009-10; the Tribunal's order confirming assessment is upheld.

Final Conclusion: Writ petitions dismissed; the Commercial Taxes Tribunal's order dated 24.03.2017 confirming the Commissioner's order dated 30.10.2012 is affirmed and facility charges are held exigible to VAT for the assessment years 2008-09 and 2009-10.

Concealment of particulars of assets - penalty under section 18(1)(c) of the Wealth Tax Act - voluntariness of a belated return - deemed service of notice sent by registered post - material date for levy of penalty - Explanation 2 to section 18(1)(c) (deeming provision) - penalty as a civil liability

Penalty under section 18(1)(c) of the Wealth Tax Act - voluntariness of a belated return - deemed service of notice sent by registered post - material date for levy of penalty - Explanation 2 to section 18(1)(c) (deeming provision) - penalty as a civil liability - Levy of penalty under section 18(1)(c) of the Wealth Tax Act in the three appeals is justified and is to be upheld. - HELD THAT: - The Tribunal examined whether the assessees, who had taxable net wealth on the valuation date (31st March, 2013) but failed to file the wealth tax return within the statutory period (sections 14/15), could escape penalty by filing a belated return after issue of notice under section 17(1). The material facts show a search was conducted on 4th September, 2013 and that cash in hand forming taxable wealth on the valuation date was not declared within the time available. A notice under section 17(1) was issued on 30th March, 2016 and the belated return was filed on 25th April, 2016. The notice sent by registered post did not return, giving rise to the presumption of service in the ordinary course, and no dispute as to service was raised before the Assessing Officer. The Tribunal applied the principle that the wrongful act for which penalty is leviable is the concealment as it stood on the date the concealment was committed - i.e., failure to disclose taxable net wealth within the prescribed period - and that the law operative on that date governs liability to penalty. Invocation of Explanation 2 to section 18(1)(c) supports deeming concealment where the original return was not filed within time. Reliance was placed on precedents of the Supreme Court and High Courts to the effect that voluntary disclosure after detection does not automatically absolve the assessee from penal consequences (Brij Mohan v. CIT ; CIT v. Omkar Saran & Sons ; B. N. Sharma v. CIT ; Zoom Communications ; Dharmendra Textile Processors ; Atul Mohan Bindal ; Mak Data Pvt. Ltd. v. CIT ). The Tribunal held that acceptance of the belated return at the same wealth cannot nullify the fact of earlier concealment and that allowing an assessee to avoid penalty merely because the returned wealth coincides with the wealth later assessed would produce an anomalous result and frustrate the statutory scheme. The Tribunal also accepted that penalty is civil in nature and that a mere affidavit denying service, which did not contest service before the Assessing Officer, was not sufficient to discharge the onus of proving non-service where registered post presumed delivery and no contrary material was produced. Applying these principles to the undisputed facts, the Tribunal concluded that the assessees concealed particulars of assets within the meaning of section 18(1)(c) and that levying of penalty was justified. [Paras 5, 6, 9, 10]

The appeals are dismissed and the penalty under section 18(1)(c) is sustained against the assessees.

Final Conclusion: On the facts - undisputed taxable wealth on the valuation date, failure to file the original return within the statutory period, deemed service of the section 17(1) notice and filing of a belated return only after issue of notice - the Tribunal upheld the levy of penalty under section 18(1)(c) of the Wealth Tax Act and dismissed the appeals.

Lawfulness of search and seizure where accused voluntarily produces contraband - Compliance with Section 50 and Section 52 of the NDPS Act - Admissibility and evidentiary value of Field Drug Detection Kit and mahazar - Compliance with Standing Instruction No.1/88 regarding sampling and quantitative analysis - Commercial quantity and its relevance to non-bailable status under Section 37 of the NDPS Act - Prima facie satisfaction under Section 37 for grant or refusal of bail

Lawfulness of search and seizure where accused voluntarily produces contraband - Compliance with Section 50 and Section 52 of the NDPS Act - Whether non-compliance with provisions relating to search of a female accused (Section 50/52) vitiates seizure where the accused voluntarily opened her bag and produced contraband. - HELD THAT: - The court found that the petitioner voluntarily opened her bag and produced four ball shaped packets which were seized in the presence of panch witnesses. Where incriminating articles are produced voluntarily by the accused without force or coercion, the mandatory search formalities contemplated by Section 50/52 do not automatically apply. The Mahazar records and presence of independent witnesses showed seizure of the articles rather than a compelled search of the person; therefore, the non search of the accused by a female officer was not treated as a fatal irregularity at the bail stage. [Paras 16, 17]

Non compliance with the female search requirement did not vitiate the seizure where the accused voluntarily produced the contraband; this irregularity did not entitle the petitioner to bail.

Admissibility and evidentiary value of Field Drug Detection Kit and mahazar - Compliance with Standing Instruction No.1/88 regarding sampling and quantitative analysis - Whether absence of quantitative analysis (and partial non compliance with Standing Instruction No.1/88) requires bail because the prosecution had not produced the quantitative report showing commercial quantity. - HELD THAT: - The court acknowledged the statutory and instructionary requirement that quantitative analysis be completed (Standing Instruction No.1/88), but noted that the officers used the Field Drug Detection Kit, the Mahazar recorded that 400 grams (commercial quantity) were detected, and samples (5 g each) were drawn for qualitative testing. While recognizing infirmities in sample taking and that detailed compliance may be scrutinized at trial, the court held that the prima facie material furnished by the Mahazar and field tests was sufficient at the bail stage to require an opportunity for the prosecution to establish quantity at trial. The earlier authorities cited do not compel grant of bail at the interim stage where prima facie evidence exists and formal compliance can be tested during trial. [Paras 18, 19, 20, 23]

Absence of the quantitative analysis report did not, at the bail stage, negate the prima facie evidence from the Mahazar and field tests; prosecution should be given opportunity to establish quantitative results at trial.

Commercial quantity and its relevance to non-bailable status under Section 37 of the NDPS Act - Prima facie satisfaction under Section 37 for grant or refusal of bail - Whether the petitioner is entitled to bail notwithstanding the operation of Section 37 of the NDPS Act in view of the facts on record. - HELD THAT: - Section 37 imposes special restrictions on grant of bail for offences involving commercial quantity, requiring the court to be satisfied that there are reasonable grounds for believing the accused is not guilty and not likely to offend while on bail, and to permit the Public Prosecutor to oppose bail. The court observed that the Public Prosecutor was given opportunity to be heard and that there was sufficient prima facie material (seizure in presence of panch witnesses, field test results and Mahazar recording commercial quantity) to form a tentative satisfaction against the accused at this stage. Non compliance with procedural formalities, where not shown to have prejudiced the accused, does not automatically dilute the rigour of Section 37 at the bail stage; such formalities can be canvassed and rebutted at trial. [Paras 12, 13, 14, 22, 24]

Given the prima facie material and compliance with opportunity to the Public Prosecutor, the petitioner did not satisfy the requirements under Section 37 and was not entitled to bail.

Final Conclusion: The High Court dismissed the petition; on the facts and prima facie material (voluntary production, Mahazar and field test indicating commercial quantity) and having afforded the Public Prosecutor an opportunity, the petitioner was not entitled to bail under Section 37 of the NDPS Act, and prosecution was permitted to establish quantitative compliance at trial.